The US Internal Revenue Service (IRS) has issued a reminder that taxpayers must report gig economy income on their tax returns (COVID Tax Tip 2021-21, 18 February 2021).
The gig economy is also referred to as the on-demand, sharing or access economy. This includes renting out a home or spare bedroom and providing delivery services.
People working in the gig economy are generally required to pay:
- income taxes;
- social security taxes (Federal Insurance Contribution Act or Self-employment Contribution Act taxes); and
- additional Medicare taxes.
Gig economy income is taxable regardless of whether the activity is only part-time, side work, or a primary source of income, or even if the taxpayer is paid in cash.
Independent contractors may be able to deduct business expenses related to the use of things like their car or house provided they keep records of their business expenses.