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Gig Worker Help

Taxpayers who work in the gig economy need to understand how their work affects their taxes. A little pre-planning can help make sure gig economy workers are prepared when it’s time to file their tax return.

Whether you are gigging full time, parttime, casually or get a 1099 or not, your income may be taxable

First things first, here’s a quick overview of the gig economy:

The gig economy is also referred to as the on-demand, sharing or access economy. People involved in the gig economy earn income as a freelancer, independent worker or employee. They use technology to provide goods or services. This includes things like renting out a home or spare bedroom and providing car rides.

Here are some things taxpayers should know about the gig economy and taxes:

  • Money earned through this work is usually taxable.
  • There are tax implications for both the company providing the platform and the individual performing the services.
  • This income is usually taxable even if the:
       o Taxpayer providing the service doesn’t receive an 
          information return, like a Form 1099-MISC, Form
          1099-K, or Form W-2. 
        o Activity is only part-time or side work.
        o Taxpayer is paid in cash.
  • People working in the gig economy are generally required to pay:  
        o Income taxes.
        o Federal Insurance Contribution Act or Self-
           employment Contribution Act tax.
        o Additional Medicare taxes.
  • Independent contractors may be able to deduct business expenses. These taxpayers should double check the rules around deducting expenses related to use of things like their car or house. They should remember to keep records of their business expenses.
  • Special rules usually apply to rental property also used as a residence during the tax year. Taxpayers should remember that rental income is generally fully taxable.
  • Workers who do not have taxes withheld from their pay have two ways to pay their taxes in advance. Here are these two options:
          o Gig economy workers who have another job where
             their employer withholds taxes from their paycheck
             can fill out and submit a new Form W-4. The
             employee does this to request that the other 
             employer withholds additional taxes from their 
             paycheck. This additional withholding can help cover
             the taxes owed from their gig economy work.
          o The gig economy worker can make quarterly
             estimated tax payments. They do this to pay their
             taxes and any self-employment taxes owed
             throughout the year.

How to Tax for Gig Economy

The Internal Revenue Service this week launched a new Gig Economy Tax Center on IRS.gov to help people in this growing area meet their tax obligations through more streamlined information.

Delivering, driving, drop off, pick up…

“The IRS developed this online center to help taxpayers in this emerging segment of the economy,” said IRS Commissioner Chuck Rettig. “Whether renting out a spare bedroom or providing car rides, we want people to understand the rules so they can stay compliant with their taxes and avoid surprises down the line.”

Educating gig economy workers about their tax obligations is vital because many don’t receive form W-2s, 1099s or other information returns for their work in the gig economy. However, income from these sources is generally taxable, regardless of whether workers receive information returns. This is true even if the work is fulltime, part-time or if the person is paid in cash. Workers may also be required to make quarterly estimated income tax payments, pay their share of Federal Insurance Contribution (FICA), Medicare and Additional Medicare taxes if they are employees and pay self-employment taxes if they are not considered to be employees.

The Gig Economy Tax Center streamlines various resources, making it easier for taxpayers to  find information about the tax implications for the companies that provide the services and the individuals who perform them.

It offers tips and resources on a variety of topics including:

  • filing requirements
  • making quarterly estimated income tax payments
  • paying self-employment taxes
  • paying FICA, Medicare and Additional Medicare
  • deductible business expenses
  • special rules for reporting vacation home rentals

For more information, check out the new Gig Economy Tax Center on IRS.gov.

IRS urges businesses to e-file cash transaction reports; It’s fast, easy and free

IRS urges businesses to e-file cash transaction reports; It’s fast, easy and free

WASHINGTON — The Internal Revenue Service today urged businesses required to file reports of large cash transactions to take advantage of the speed and convenience of filing these reports electronically.

Although businesses have the option of filing Form 8300, Report of Cash Payments Over $10,000, on paper, many have already found that e-filing is a faster, more convenient and cost-effective way to meet the reporting deadline. The form is due 15 days after a transaction and there’s no charge for the e-file option.

Electronically filing Form 8300 is a secure way for businesses to send sensitive information to the IRS. Although many cash transactions are legitimate, information reported on this form can help stop those who evade taxes, profit from the drug trade and engage in terrorist financing and other criminal activities. The government can often trace money from these illegal activities through the payments reported on this and other cash reporting forms.

Businesses that file Form 8300 electronically get free, automatic acknowledgment of receipt when they file. In addition, electronic filing is more accurate, reducing the need for follow-up correspondence with the IRS.

To file Form 8300 electronically, a business must  set up an account with the Financial Crimes Enforcement Network’s BSA E-Filing System. For more information, interested businesses can call the BSA E-Filing Help Desk at 866-346-9478 or email them at BSAEFilingHelp@fincen.gov. The help desk is available Monday through Friday from 8 a.m. to 6 p.m. Eastern time.

For more informationabout the reporting requirement, see FS-2019-1, available on IRS.gov. Among other things, the fact sheet includes reporting scenarios for specific businesses, such as automobile dealerships, taxi companies, landlords, colleges and universities, homebuilders and bail-bonding agents. It also lists other resources on IRS.gov related to reporting cash transactions of more than $10,000.

Common Errors to Avoid when Filing a Tax Return

Common Errors to Avoid when Filing a Tax Return

To ensure they meet their tax obligations, taxpayers should file accurate tax returns. If a taxpayer makes an error on their tax return, it will likely take longer to process and could delay a refund. Taxpayers can avoid many common errors by filing electronically, the most accurate way to file a tax return. All taxpayers can use IRS Free File.

Here are common errors to avoid when preparing a tax return:

•Missing or inaccurate Social Security Numbers. Be sure to enter each SSN on a tax return exactly as printed on the Social Security card.

•Misspelled names. Spell all names listed on a tax return exactly as listed on the taxpayers’ Social Security cards.

•Filing status.  Some taxpayers claim the wrong filing status, such as Head of Household instead of Single. The Interactive Tax Assistant on IRS.gov can help taxpayers choose the correct status. E-file software also helps prevent mistakes.

•Math mistakes.  Math errors are common, ranging from simple addition and subtraction to more complex items. Figuring the taxable portion of a pension, IRA distribution or Social Security benefits is more difficult and results in more errors. Taxpayers should always double check their math. Better yet, tax preparation software does it automatically.

•Figuring credits or deductions. Taxpayers can make mistakes figuring their Earned Income Tax Credit, Child and Dependent Care Credit, the standard deduction and other items. Follow the instructions carefully. For example, a taxpayer who’s 65 or older, or blind, should claim the correct, higher standard deduction, if not itemizing. The IRS Interactive Tax Assistant can help determine if a taxpayer is eligible for tax credits or deductions.

•Incorrect bank account numbers. Taxpayers who are due a refund should choose direct deposit for ease and convenience, but the IRS cautions taxpayers to use the right routing and account numbers on the tax return.

•Unsigned forms. An unsigned tax return isn’t valid. Both spouses must sign a joint return. Taxpayers can avoid this error by filing their return electronically and digitally signing it before sending it to the IRS. Taxpayers who are using a tax software product for the first time will need their adjusted gross income from their 2016 tax return to file electronically. Taxpayers who are using the same tax software they used last year usually will not need to enter prior-year information to electronically sign their 2017 tax return.

•Filing with an expired ITIN. The IRS will process and treat as timely a return filed with an expired Individual Tax Identification Number, but won’t allow any exemptions or credits. Taxpayers will receive a notice explaining that an ITIN must be current before the IRS will pay a refund. Once the taxpayer renews the ITIN, the IRS will process exemptions and credits and pay an allowed refund. ITIN expiration and renewal information is available on IRS.gov.

Six Reasons to E-file

Six Reasons to E-file

For taxpayers who still file a paper return, there is no better time to switch to e-file. The IRS expects 90 percent of individual taxpayers to file electronically in 2018. Choosing e-file and direct deposit for refunds remains the fastest and safest way to file a complete and accurate income tax return and receive a refund.

Here are the top six reasons why taxpayers should file electronically in 2018:

  • It is accurate and easy. E-file software helps taxpayers avoid mistakes by doing the math. It guides filers through each section of their tax return. The software uses a question-and-answer format that makes doing taxes easier.
  • It is secure. E-file meets strict security guidelines. It uses modern encryption technology to protect tax returns. The IRS continues to work with states and tax industry leaders to protect tax returns from identity theft refund fraud. This effort has helped to put strong safeguards in place to make tax filing a safe and secure option.
  • It is convenient. Taxpayers can buy commercial tax software to e-file right from their home computer. They can also ask their tax preparer to e-file their tax return. Most paid preparers must file their clients’ returns electronically.
  • Most e-filers get their refunds faster. When someone files electronically, there is nothing to mail and the return is virtually mistake-free. This means the fastest way for a taxpayer to get a refund is to combine e-file with direct deposit.
  • It’s often free. Many taxpayers can e-file for free through IRS Free File. Free File is only available on IRS.gov. Some taxpayers may also qualify to have their taxes e-filed for free through IRS volunteer programs. Volunteer Income Tax Assistance offers free tax preparation to people who generally earned $54,000 or less. Tax Counseling for the Elderly generally helps people who are age 60 or older.
  • There are several options for making payments. Taxpayers who owe taxes can e-file early and set up an automatic payment on any day until the April deadline. They can pay electronically from their bank account with IRS Direct Pay. Taxpayers can visit IRS.gov/payments for information on the other payment options.

 

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