If you don’t know what the gig economy is, you probably have been part of it already if you have taken an Uber ride recently.
The gig economy, or shared economy, is defined as an activity where people earn income providing on-demand work, services or goods. Often, this happens through a digital platform such as apps or websites.
Some examples of gig work include driving a car for booked rides or deliveries, renting out property or part of it, selling goods online and providing creative or professional services.
Create a Separate Business Account
It’s advisable that you create a business bank account that’s separate from your personal account. This way it will be easier to track your income and it will also be useful when you make a deduction. Use your business account for job-related purchases and payments. Make sure to take advantage of all the features provided with your account, which may include alerts, and other tools to manage your income.
Track Earnings From All Your Jobs
Unlike people with a full-time employment, gig workers don’t receive a W-2 form from an employer. Therefore, they must keep records of income earned from all their jobs throughout the year. This is important to consider, as people may have more than one gig job.
Use the Right Forms
You should use the 1099-MISC form to report income other than a traditional salary. If you worked different gig jobs during the year, make sure you receive a 1099-MISC from any company that paid you more than $600. On the other hand, form 1099-K is for tracking income earned by third-party transactions through providers such as PayPal.
Track and Take Advantage of Write-offs
Those who take part in the gig economy can deduct many costs. From gas expenses, wear and tear on your vehicle, materials, and meals, there are many write-offs you must make sure to track throughout the year. You should try to keep your paper receipts, but if you lose one, bank statements are also considered a valid proof of any transaction.
Get Advice From an Expert
If you are a gig economy wage earner, a tax expert can help you lower your tax burden and offer guidance on all your financial needs. With their help, you can identify the write-offs you may have and file your taxes using all the right forms.
At JT Tax Services we are committed to provide solutions tailored to your unique needs. Contact us today by email or telephone (805-984-8890) to schedule an appointment or to learn more about our services.