Why Pay and Prepare Your Taxes

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Tax Tips for Gig Workers – Uber | Lyft | DoorDash |InstraCart | Airbnb

Prior to covid-19, the gig economy seems to be on steriods. The emergence of Amazon, Uber and Lyft, Airbnb, InstraCart, Grubhub, DoorDash were all new entries into the way we now live. More and more people tend to use gig work to supplement their income.

If you take up gig work on a part-time or full-time basis, often through a digital platform like an app or website. Gig work, such driving a car for booked rides, selling goods online, renting out property, or providing other on-demand work, is taxable and must be reported as income on the worker’s tax return.

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. The reporting requirement for issuance of Form 1099-K changed for payments received in 2022 to totals exceeding $600, regardless of the total number of transactions. This means some gig workers will now receive an information return. This is true even if the work is full-time or part-time.
  • 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

Proper worker classification:

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.

Paying 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.


More information:
Publication 5369, Gig Economy and your taxes: things to know
Publication 1779, Independent Contractor or Employee
Is My Residential Rental Income Taxable and/or Are My Expenses Deductible?

Share this tip on social media — #IRSTaxTip: Here are some things gig economy workers should know about their tax responsibilities. http://go.usa.gov/xJ7KX

Independent Contractors (Uber or Lyft) Accounting Tips

The challenge we see in our practice is that Independent Contractors do not take the time to keep good accounting records. Keeping good records is the fuel to your business when it comes to taxes.

Fundera magazine, the small business resource center have 11 accounting tips for small business owners and self-employed individuals that we like to share with you. These tips are not just for Uber or Lyft drivers. If you are am Amazon delivery driver, or postmate, ubereats, doordash or instracart, you may want to take note of these.

  1. Separate business and personal expenses
  2. Track every business expense
  3. Accurately record income
  4. Consider hiring a professional, even if temporarily
  5. Automate accounting practices with accounting software
  6. Dedicate time to update your books
  7. Keep tabs on labor costs
  8. Be prepared for major expenses
  9. Maintain inventory records
  10. Follow up on invoices and receivables to avoid overpaying on taxes
  11. Create financial projections for future years

Related Articles

https://www.entrepreneur.com/article/356782
https://www.fundera.com/blog/do-you-need-an-accountant-for-a-small-business
https://www.inc.com/guides/2010/04/choosing-an-accountant.html

Friendly Tax Services

Friendly Tax Services is the premier income tax preparation firm for individuals, families, small business owners and the self-employed; Uber, Lyft, Taxi, and Limousine drivers; Actors, Independent Contractors and Entrepreneurs. We have empathy and understand the toll driving takes on Uber, Lyft, Taxi, and Truck drivers. That driving is time consuming. Uber drivers just don’t have the time it takes time to keep track of those business-related expenses.


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