In the past several years, this country has seen a boom in companies that offer every day people the chance to make good money on the side. Examples of this are ride-sharing companies like Uber and Lyft, which created a mechanism for anyone who can pass a basic background check and has their own car to earn income by driving people from place to place. Another example of this is companies like AirBNB, VRBO, and HomeAway, which allow people to painlessly rent their homes and real estate as if they were hotels. This trend of people “sharing” their services or property in exchange for money has been referred to as the “Gig Economy” or the “Sharing Economy.”
People are quickly becoming more comfortable using and providing these services. In fact, hotel and taxi companies consider the gig economy to be incredibly disruptive to their earnings and business models, as Uber can offer lower fares than taxi companies, and AirBNB rentals can cost consumers much less per night than hotel rooms. The IRS has also taken notice, and has published resources for taxpayers to determine their tax obligations from their sharing income.
Reporting Income to the IRS
The IRS treats income from the gig economy as taxable, self-employment income. Even if you do not receive a 1099 form or other income statement from the company who facilitates the sharing service, you have a duty to report and pay taxes on that income. This is true even if you are paid in cash or if the work is part-time or weekend work. Of course, like with other self-employment reporting, you are also allowed to claim business expenses as deductions. For example, property owners renting out their property, this may include mortgage interest, property taxes, depreciation, maintenance, and homeowner’s insurance.
If you are making money off the gig economy, it is important to report the income and expenses accurately, because in the eyes of the IRS, you are essentially running your own business. With increasing scrutiny for income generated from the gig economy, it is critical to keep records and receipts to justify every expense and deduction you claim. In addition, if you receive income reporting forms, make sure that your reported income matches those forms.
Contact a Tax Attorney for Assistance
If you are making money from the gig economy, and need guidance on the tax implications, call me. You need a tax attorney who remains up to date with the status of the law and can guide you through the ever-changing realm of IRS taxation. I have been a tax attorney for over two decades and have a Master of Law Degree (LLM) in Taxation, and a license to practice in the United States Tax Court. Contact The Law Offices of Robert S. Thomas at 847-392-5893 to schedule a consultation or visit our website today.