Are you a Gig Worker who earns $600 or more? Did you know that Gig Economy Income is Taxable?
The recent expansion of the gig economy may bring many confusions as to the tax issues of the
gig workers. The answer is simple. Gig workers need to pay their taxes if the payments received in 2022
totals exceeding $600, regardless of the total number of transactions. The gig economy – also called
sharing economy or access economy – is activity where people earn income providing on-demand work,
services or goods. Often, it is through a digital platform like an app or website. Gig workers must report
income earned from the gig economy on a tax return, even if the income is from part-time, temporary
or side work, even if the income is not reported on an information return form like a Form 1099K, 1099-
MISC, W-2 or other income statements. This includes when the income is paid in any form, including
cash, property, goods, or virtual currency.
What counts as Gig Work? Gig work is certain activity that you do to earn income, often through
an app or website (digital platform), like: (1) drive a car for booked rides or deliveries, (2) rent out
property or part of it, (3) run errands or complete tasks, (4) sell goods online, (5) rent equipment, (6)
provide creative or professional services, (7) provide other temporary, on-demand or freelance work.
This list does not include all types of gig work.
Digital platforms are businesses that match workers’ services or goods with customers via apps
or websites. This includes businesses that provide access to: (1) Ridesharing services, (2) Delivery
services, (3) Crafts and handmade item marketplaces, (4) On-demand labor and repair services, (5)
Property and space rentals. This list does not include all types of digital platforms.
Gig works may be required to make quarterly estimated tax payments. Individuals have to make
estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed.
Corporations generally have to make estimated tax payments if they expect to owe tax of $500 or more
when their return if filed. If they are self-employed, gig workers must pay all their Social Security and
Medicare taxes on their income from the gig activity.
The business or platform must determine whether the individual providing the services is an
employee or independent contractor. If you are a business owner or contractor who provides services to
other businesses, then you are generally considered self-employed. If you are a business owner hiring or contracting with other individuals to provide services, then you must determine whether the individuals
providing services are employees or independent contractors. Independent contractors may be able to
deduct business expenses, depending on tax limits and rules. It is important for taxpayers to keep
records of their business expenses.
Generally, the common law rule to deciding whether you are an employee or and independent
contractor is the degree of control in terms of the rules of (1) Behavioral, (2) Financial, (3) Type of
Relationship. The Behavioral rule is whether the company controls or has the right to control what the
worker does and how the worker does his or her job. The Financial rule is whether the business aspects
of the worker’s job is controlled by the payer, including things like how the worker is paid, whether the
expenses are reimbursed, who provides tools/supplies, etc. The Teype or Relationship rule is whether
there are written contracts or employee type benefits (such as pension plan, insurance, vacation pay,
etc.), and whether the relationship will continue and whether the work performed is a key aspect of the
business. If things are unclear, it is possible to file a Form SS-8 to have the IRS determine the status for
you.
As for individuals considered employees, the employer typically withholds income taxes from
their employees’ pay to help cover income taxes their employees owe. For gig economy workers who
aren’t considered employees have two ways to cover their income taxes. These are: (1) submit a new
Form W-4 to their employer to have more income taxes withheld from their paycheck if they have
another job as an employee, and (2) make quarterly estimated tax payments to help pay their income
taxes throughout the year, including self-employment tax.
Here is how to contact Low-Income Taxpayer Clinic, Indiana Legal Services, Inc. if you need help.
Indiana Legal Services, Inc.
College Square, 2 nd Floor
214 South College Avenue
Bloomington, IN 47404
Toll Free: (800) 822-4774
Phone: (812) 339-7668
Fax: (812) 339-2081
Intake Number & Hours:
(844) 243-8570 | M-F 10AM—2PM EST
www.indianalegalservices.org
Richard Kim,
Legal Extern in Public Interest