Let’s face it: Taxes can be confusing, especially if you’re a gig worker or contractor. We’re breaking down some common questions to help you tackle tax season with ease.
Who is considered a gig-worker?
The gig economy is rapidly growing every year—in fact, it’s predicted that by 2027 the United States will have more gig workers than traditional W-2 employees. Freelancers, independent contractors, and delivery drivers are all considered gig workers. For tax purposes, the IRS classifies gig workers as “self-employed.” (Check out more info on who is considered self-employed here.)
What is self-employment tax?
As a self-employed individual, your tax responsibilities are more substantial than a full-time employee because you cover the cost of medicare and social security on your own. (With a full-time employer, they help to cover those costs.)
What is Non-employee compensation?
Non-employee compensation is income an organization pays an independent contractor that is more than $600. Some additional non-employee compensation are fees, commissions, and benefits.
What is a 1099?
A 1099 form is used to report income that isn’t from a full-time employer. (So, if you’re a gig worker, you’ll be using this form instead of a traditional W-2.) If an organization paid you $600 or more in the 20201 tax year, you should receive a 1099-NEC from that organization. Please note that prior to 2019, non-employee compensation was reported on the 1099-MISC form.
Learn more about your self-employed 1099 tax responsibilities here.
Do you have to report income from your freelance work or side hustle?
Yes. The IRS requires you to report all forms of income. However, the good news is that you can deduct work related expenses since you likely use your own money to pay for the costs of running your business. For a detailed look at reporting deductions, check out this guide.
When are taxes due?
The due date for filing tax returns and making tax payments is Monday April 18, 2022.
If your gross income is under $72,000, you can take advantage of the IRS Free File program. Add your Branch Account and Routing Numbers so you don’t have to worry about waiting for the paper check for your tax refund to come in the mail.
Read more about preparing for tax season here.
This blog post is intended for general information purposes only and should not be considered legal, accounting, financial or tax advice.