Many of our clients are knowingly, or unknowingly, participating in the “gig economy”. Whether you’re driving for platforms like Uber or Doordash, renting your property through AirBnB or Vrbo, or receiving payments through apps like Venmo, Paypal, Etsy, Stripe, Upwork, or CashApp, it’s essential to be aware of recent developments in this space.
These types of companies/applications are required to file a form 1099-K that reports gross payment transactions processed on your behalf. What’s new is that the threshold for requiring a 1099-K to be issued was set to be lowered from the former threshold of $20,000 exceeding 200 transactions to a flat $600. The IRS announced November 22nd, 2023 that the implementation of this threshold change will be delayed until 2024 and phased to $5,000 rather than $600. Anyone receiving more than 5,000 in any of these apps will receive a 1099-K for tax year 2024.
What does this mean for me? We work with our clients to ensure that their income is properly reported. If you receive a 1099-K it is essential to provide it with your tax paperwork. It is also going to be very important moving forward that you pay attention to the following:
Key Steps for all:
- Separate Personal and Business/Gig Income:
Start by distinguishing between personal amounts and gig income receipts. This includes money received for personal loans, gifts, or shared expenses that aren’t subject to tax. If you use Venmo or CashApp for business purposes AND personal purposes, make sure you are keeping good records!
- Track Deductions:
Form 1099-K only reports gross receipts, so it’s crucial to track and document allowable deductions. This includes maintaining records for expenses related to your gig, such as vehicle costs, parking and toll fees, mobile device use, and internet services.
- Estimated & Self-Employment Tax:
Gig workers may need to make quarterly installment payments of estimated tax to avoid penalties. We can help you calculate your needed estimated tax payments. Additionally, know that some or all of this income could be subject to self-employment tax.
What Should I Do Now?
Begin collecting necessary receipts and bank statements for accurate business deductions.
If you’re unsure about estimated tax payments, contact us for guidance.
We are here to help you navigate these changes and ensure your tax obligations are met. If you have any questions or concerns, please don’t hesitate to reach out to our office.