Becoming part of the gig work economy provides flexibility for you to work when you want and where you want, without having to answer to a boss or sit at a desk from 9 to 5. But being a gig worker doesn’t get you out of paying IRS taxes.
Here’s what you need to know about gig worker taxes and how to manage back taxes for gig work.
What Is Gig Work?
Gig work is work performed on a freelance or contract basis, often through a digital app or platform.
Examples of gig work include:
- Driving rideshare for Uber or Lyft
- Delivering food for a service like DoorDash, Grubhub, or Uber Eats
- Delivering packages for Amazon
- Offering creative services on websites like Fiverr or Upwork
- Selling products or services online as an affiliate marketer
What Records Do I Need for Taxes?
As a gig worker, you are responsible for paying taxes on all the money you earn via gig work, but you’re also allowed to deduct the expenses for that work. You need to keep up with both so you can report them accurately to the IRS.
Gig Worker Income
Depending on the type of gig work you do, you can report your gig worker income to the IRS using three main 1099 forms:
- 1099-NEC. This 1099 form is used by businesses to report compensation paid to non-employees. You will receive one from any business you did contract or freelance work for. This type of compensation used to be reported on Form 1099-MISC.
- 1099-MISC. This 1099 form is for reporting miscellaneous compensation. It has mostly been replaced by Form 1099-NEC, but it is still used for specific payments, such as those to an attorney or landlord.
- 1099-K. You will receive this 1099 form from any business that paid you for gig work via a third-party app such as Venmo or PayPal.
Gig Worker Expenses
Compared to taxes on salaried income, a benefit of gig worker taxes is that you can deduct gig work expenses. Examples include:
- Business Expenses. These may include rent, phone, internet, and other third-party services like marketing and advertising.
- Travel Expenses. If you travel as part of your gig, you can deduct mileage. Note this doesn’t include your daily commute to or from a gig.
- Car Expenses. If you have a work vehicle used only for your gig, you can deduct its cost and maintenance.
- Qualified Business Income. Self-employed individuals and small business owners can deduct up to 20% of their qualified business income.
Do I Need to Make Estimated Tax Payments?
If you’re a full-time gig worker, you are generally expected to estimate your tax liability every quarter and make estimated payments. If you work a W-2 job and perform gigs on the side, you might not have to make these estimated payments.
How Do I Estimate Gig Worker Taxes?
The easiest way to estimate your gig work taxes each quarter is to use IRS Form 1040-ES.
When Do I Need to Make Estimated Tax Payments?
Gig worker estimated tax payments are due four times each year:
- April 15. For money earned January 1 to March 31.
- July 15. For money earned April 1 to June 31.
- October 15. For money earned July 1 to September 30.
- January 15. For money earned October 1 to December 31.
What Tax Return Forms Do I File?
As a gig worker, you’ll generally file up to three forms:
- Form 1040. This is your individual income tax return.
- Schedule SE. This schedule form is for calculating your self-employment tax. As a gig worker, you’re responsible for paying 100% of your Medicare and Social Security taxes.
- Schedule C. If your gig business is its own entity, this form is where you report its profit or loss.
What if I’m a Gig Worker with Back Taxes and Can’t Pay Them?
If you owe gig worker back taxes and can’t pay them, the IRS offers several tax relief options:
- Offer in Compromise. If you’re a gig worker with a real financial hardship, the IRS might accept an offer for you to settle your gig work tax debt for less than you owe.
- Currently Not Collectible Status (or Hardship Status). Gig workers with a temporary hardship can request that the IRS pause collections until a financial situation improves.
- IRS Installment Payment Plan. As a gig worker, you can almost always set up an installment payment plan with the IRS and pay off your gig work tax debt monthly over several years instead of all at once.
Call Wiztax at 866-568-4593 or get started for free so we can tell you exactly how we can help with these options. We never charge for ‘investigations’ or consultations so call or schedule a call today.
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