Here are some things gig workers should know to stay on top of their tax responsibilities.
Gig work is taxable. Earnings from gig economy work is taxable, regardless of whether an individual receives information returns. Gig workers may be required to make quarterly estimated tax payments. If they are self-employed, gig workers must pay all their Social Security and Medicare taxes on their income from the gig activity.
While providing gig economy services, it is important that the taxpayer is correctly classified. This means the business, or the platform, must determine whether the individual providing the services is an employee or independent contractor. Taxpayers can use the worker classification page on IRS.gov to see how they should be classified. Independent contractors may be able to deduct business expenses, depending on tax limits and rules. It is important for taxpayers to keep records of their business expenses.
Gig workers must pay the right amount of taxes throughout the year. An employer typically withholds income taxes from their employees' pay to help cover income taxes their employees owe. Gig economy workers who aren't considered employees have two ways to cover their income taxes:
Submit a new Form W-4 to their employer to have more income taxes withheld from their paycheck if they have another job as an employee.
Make quarterly estimated tax payments to help pay their income taxes throughout the year, including self-employment tax.
The Gig Economy Tax Center on IRS.gov answers questions and helps gig economy taxpayers understand their tax responsibilities.