Posted by BEST FINANCIAL GROUP LTD

Common Tax Problems For Gig Economy Workers

Common Tax Problems For Gig Economy Workers

The scope of economy has increased by a great 27 percent which is much more than a traditional employment. It does not matter if you work part time or a job which is full time with full income and which has a great variety of gigs in it, there is always a chance for tax deductions as well as taxes to be paid that can cause a whole in your finances. Let us now have a look at some common tax problems for the gig economy workers. 

It is true that gig economy workers also face some common tax problems and there is little or no way absolutely to avoid these problems.

  • The tax being self employed

If you work on a full time job, then the social security and medicare taxes will be cut from your salary as they are compulsory to be paid. Those workers who work in the gig economy have to pay these taxes as it comes under the heading of the self employed tax. The bad thing about these taxes is this that these taxes are quite high in amount due to the fact that the freelancers and the contractors have to pay both the employer as well as the employee so that they can pay their medicare and social security taxes. 

  • The income tax

If you are self employed and earn 400 dollars or more than this amount, you have to pay the income taxes. This is a fixed amount on which you have to pay the income tax only if you are self employed. 

  • Deductions if you work in a home office

It is quite possible to run up a business successfully at your home if you have a huge place or either rent out a home and run the business from there. It is the announcement of the IRS that the place of your office must be entirely for the work that you do there so that you can determine the exact amount of your deduction. 

Any kind of item that you specifically buy for running your office and that includes all kinds of furniture or other equipments are tax deductible. You should be deducting the amount of those items which you already had before you started this home office and using them in the office now. It is quite simple to understand that any space dedicated purely for home office use is easily tax deductible.

  • The expenses of running a car

Any of the expenses that are made by using the car that you make which are work related are also tax deductible. Traveling to another state to meet the clients, fuel and other vehicle related expenses when you have to work for your office all are tax deductible.

Apart from that, any kind of wear and tear which occurs in your vehicle during the trips made for office can also be tax deductible. You need to keep clear proofs with you and all the records of the expenses that are made so that you can show them for proof and evidence.

  • Supplies needed for business

If you do some art and craft activity in order to sell it so you will of course deduct the amount that you have spend on the materials. All kinds of expenses that are related to the business are all tax deductible which will be paid later on by the business company to the employer. 

A final discussion

Even if you are self employed, it does not at all mean that paying the taxes on time is not important. In fact, it is extremely important for a self employed person to pay the taxes on its time. Late fees will be charged if the taxes are not paid on time. 

If the tax is not paid on time then a 5 percent extra fee will be charged on every month of the unpaid tax along with the actual tax amount. Apart from this, if the tax is not paid on time then a penalty of 25 percent will be charged on the total amount of taxes that are to be paid. So, these were the common tax problems for the gig economy workers. 

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