To boost their income (or simply become their own boss), some 3.2 million Americans have turned to side gigs like Uber, TaskRabbit. Some even go so far as to rent out their own apartments through sites like Airbnb while they are traveling for work or pleasure. But what a lot of folks may not realize at the time is that there are tax implications, and if not prepared, they could find themselves scrambling to account for their earnings and expenses during the upcoming tax season.
Taxes Owed: The Question Is How Much, Not If
Individuals that participate in a sharing economy usually receive a 1099-K tax statement that details their earnings. In response, the taxpayer will need to file a Schedule C to offset their income with allowable expenses. One of those expenses just so happens to be the quarterly fee charged by the IRS to sole proprietors and side-gig workers.
If you are a share-worker that has not covered the IRS quarterly fee throughout the year, you are likely to see this expense on your tax return. How much you owe will be determined by a number of factors, including how much you made and the amount of your expenses. Which is exactly why it is critical that you have a reliable system for any and all expenses related to the side-gig work you do.
Ways to Keep Track of Your Paperwork
Throwing your receipts into a shoe box might work, in theory, but it is far from the most effective way to ensure you have all your expenses accounted for. Instead, consider using one of the many apps or programs now available to self-employed individuals. Some let you photograph receipts, giving you an easy record of all your expenses, and many can be shared between your phone and your computer to give you easy access on the go.
Consider Setting Aside Money to Pay the Fee
Another effective way to handle the imposed IRS tax fee is to plan and prepare for it with a separate bank account. You will need to put approximately 15 percent of your earned income in there, just to be safe, but you can also cover your expenses through this account to lessen the impact it has on your incoming cash flow.
Hire a Professional
While the extra cost of hiring a professional might seem superfluous in a world where online programs exist, assistance from an experienced tax preparer really is a necessity for new or uncertain side-jobbers. This can help you get the most out of your refund, increase your odds of receiving all the tax breaks you are entitled to, get you organized, and assist you in being better prepared for the following tax season.
If you are a side-jobber or share-worker and still owe back taxes from their previous year’s return or find themselves in the middle of an audit, wage garnishment order, bank lien or other negative tax action, an aggressive DuPage County IRS tax attorney may be another critical resource. Attorney Eric Zelazny is a certified CPA and attorney with in-depth knowledge regarding the avenues that may be taken to reach a favorable settlement with the IRS. To learn more, schedule your free initial consultation by calling 708-888-2299 today.