Here’s what HIVE AI had to say about “Do I need to report income from freelance or gig work (e.g., Uber, Etsy)?”:
Reporting Income from Freelance or Gig Work
Yes, you are required to report income from freelance or gig work, such as driving for Uber, selling on Etsy, or performing other services through digital platforms.
Reporting Requirements
Generally, income earned from the gig economy is taxable and must be reported to the IRS. The gig economy is activity where people earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website. You must report income earned from the gig economy on a tax return, even if the income is from part-time, temporary or side work; not reported on an information return form like a Form 1099-K, 1099-MISC, W-2 or other income statement; or paid in any form, including cash, property, goods or virtual currency. IRS Newsroom – IR-2022-45
Just like any other office job, money earned through the gig economy is taxable. As a gig economy worker, it’s your responsibility to keep track of the money you make and report it on your tax return. This means if you receive income from a gig economy activity, it’s generally taxable even if you don’t receive a Form 1099-MISC, Form 1099-K, W-2 or other income statement. IRS – Publication 5369: Gig economy and your taxes: things to know
Filing Threshold
Every individual (other than a nonresident alien individual) having net earnings from self-employment of $400 or more for the taxable year shall make a return with respect to the self-employment tax imposed by chapter 2. IRC § 6017 This means that if your net earnings from freelance or gig work exceed $400, you must file a tax return and report this income, even if you don’t meet other filing thresholds.
Every individual, other than a nonresident alien, having net earnings from self-employment, as defined in section 1402, of $400 or more for the taxable year shall make a return of such earnings. A return is required under this section if an individual has self-employment income, as defined in section 1402(b), even though he may not be required to make a return under section 6012 for purposes of the tax imposed by section 1 or 3. Tresuary Reg. 1.6017-1 Tresuary Reg. 1.6017-1
Self-Employment Tax
Section 1401(a) imposes, in addition to other taxes, a tax “on the self-employment income of every individual”. Self-employment income generally consists of the gross income derived by an individual from any trade or business carried on by such individual, less the allowable deductions attributable to such trade or business, during any taxable year. Dawson U.S. Tax Court Opinions: Francisco Steven Delgado
When you earn income through freelance or gig work, you’re typically considered self-employed, which means you’re responsible for both the employer and employee portions of Social Security and Medicare taxes (collectively known as self-employment tax).
Record Keeping
The IRS requires you to keep adequate proof of income and expenses. Some gig companies will track some of this information for you and send you a W-2, 1099-MISC or a 1099-K at the end of the year. Even if they don’t, it’s important that you keep track of all your income and expenses to report on your tax return. IRS – Publication 5369: Gig economy and your taxes: things to know
A taxpayer is responsible for maintaining adequate books and records sufficient to establish his income. Dawson U.S. Tax Court Opinions: Engen Robert Nurumbi
Paying Taxes Throughout the Year
If you earn a paycheck as a gig economy employee, your employer usually withholds tax from your pay to help cover taxes you owe. If you’re a gig economy worker who’s not considered an employee, two ways you can help cover your taxes are: IRS – Publication 5369: Gig economy and your taxes: things to know
Make quarterly estimated tax payments to help pay your taxes throughout the year, including self-employment tax. IRS – Publication 5369: Gig economy and your taxes: things to know
A Paycheck Checkup using the IRS Withholding Estimator can help you see if you should make additional tax payments to avoid an unexpected tax bill or underpayment penalty when you file your tax return. This is especially important if you have multiple jobs – especially if you don’t have each employer withhold taxes, or expect to pay self-employment tax. IRS – Publication 5369: Gig economy and your taxes: things to know
Business Expenses
Your business expenses may be deductible, depending on tax limits and rules. IRS – Publication 5369: Gig economy and your taxes: things to know
As a self-employed individual, you can deduct ordinary and necessary business expenses from your gross income to determine your net profit, which is the amount subject to income and self-employment taxes. Keep detailed records of all business-related expenses to maximize your legitimate deductions.
Conclusion
All income from freelance or gig work must be reported on your tax return, regardless of whether you receive a tax form from the platform or client. Failing to report this income can result in penalties and interest. If your net earnings from self-employment are $400 or more, you must file a tax return and pay self-employment tax, even if you don’t otherwise meet the filing threshold for income taxes.
Sources:
- IRS Newsroom – IR-2022-45
- IRS – Publication 5369: Gig economy and your taxes: things to know
- IRC § 6017
- Tresuary Reg. 1.6017-1
- Dawson U.S. Tax Court Opinions: Francisco Steven Delgado
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