Posted by Thomas G Kinsella, ATP

The IRS offers Special Assistance to People in the Gig Economy

The IRS offers Special Assistance to People in the Gig Economy

The gig economy has risen all over the country. The recent pandemic has forced many people to take on gig business, which might not go away any time soon. While this presents fantastic opportunities for people, it also comes with unexpected tax complications. In a bid to assist taxpayers and other professionals, the IRS recently launched a new Gig Economy Tax Center."

The IRS Commissioner Chuck Rettig, in a press release, noted that Uncle Sam developed the Gig economy in a bid to assist millions of Americans working from home. Whatever people are doing, like providing a home care service or helping people with car rides, they must be aware of the rules to be compliant and avoid any unwanted surprises in time. 

The gig economy is pretty diversified. This involves all sorts of businesses which operate using an app or a website to connect people to provide service to customers. It is also known as access economy or on-demand and comes in assorted types. The most popular type is home rentals and ride-sharing. 

Uncle Sam believes that it is essential for taxpayers to be aware of their tax obligations since many workers in this category do not get the necessary forms like 1099s, Form W2, and other forms essential for their tax. The income from the gig is, however, taxable, not minding if they got the necessary documents or not. Besides, no matter the gig's nature – full time, part-time, or cash payment is essential. 

The IRS classifies people in the gig sector as independent contractors. As a result, they are treated like other self-employed individuals in terms of taxes. This means there is a chance to deduct all their business-related expenses. 

People in this category might need to remit their estimated income tax, which is a quarterly payment. They will also have to pay their part of FICA, Medicare, and the other Medicare taxes if they are employed somewhere and send in their self-employment taxes if they are not classified as employees. 

There is a series of information available on the Gig Economy Tax center. As a result, taxpayers can quickly get access to whatever resources they want. For instance, specific information on tax implications for the companies in charge of providing the service and the workers undertaking the task. According to the press release, taxpayers can get help on various topics, and a few of the resources available are:

  • Requirement for filing 

  • How to pay self-employment taxes

  • Business expenses that can be deducted

  • Payment of FICA, Medicare, and the Additional Medicare

  • Making tax payment for quarterly estimated income

There are also state tax issues that workers in the gig economy might be faced with. A typical example is the controversial California law. This AB5 law was enacted in January 2020, and it states that most and all workers should be classified as employees, and they also qualify for work protection.

This makes it essential always to check the state law where you reside.


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Thomas G Kinsella, ATP
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