gig work income from performing services, so gig workers should establish separate TPSO account for their gig income and gig expenses and treat their self-employment as a true business reported on Schedule C of their Form 1040 Federal Income tax return. TPSOs cannot distinguish between personal amounts someone may receive vs. None of these nontaxable personal amounts should flow through a side gig TPSO because they aren’t subject to taxation like gig work income is. Colleagues reimbursing you for that large baby shower gift you all went in on for a worker’s baby shower.Paypal money you received from friends when you purchased a block of tickets to a concert and they are reimbursing you for their ticket, or.Money Venmoed from a friend to split a shared meal at a restaurant,. Some examples of personal income that aren’t subject to tax include: Separating nontaxable personal amounts received (money from personal loans or money received as a gift) from gig work income is a helpful first step towards tracking a side gig business. Separate Personal Amounts from Gig Income Receipts Tax practitioners will do well to advise their gig-working clients that they have a Schedule C business with taxable income and that they should keep proper documentation to accurately report net income to minimize their tax liability. These unsuspecting clients will be surprised when they receive their first 1099-K Form in January 2023. It’s possible some gig workers may not even be aware that income from these sources is subject to tax, let alone their responsibility to pay quarterly estimated taxes to the IRS. But Congress and the IRS know that self-employed gig workers are falling short of their responsibility to report income. In truth, we know that self-employed workers should be reporting income from their side gigs, whether it’s reported to the IRS on a Form 1099 or not.įor example, freelancers who make money from Etsy businesses or driving for Uber should have been paying taxes on net business income all along. While bills have been introduced in Congress to raise the limits back to $20,000/200 transactions, there is no guarantee they will pass. The lower threshold for filing Form 1099-K means many participants in the gig economy will be getting Forms 1099-K for the first time in 2023, especially taxpayers who have been doing these activities as side gigs. Beginning in 2022, third-party settlement organizations (TPSOs)), including banks and on-line payment networks (payment settlement entities (PSEs), are required to report payments of $600 or more to IRS and payees on Form 1099-K, Merchant Card and Third-Party Network Payments.Ĭongress dropped the minimum threshold for TPSOs to file Form 1099-K for a taxpayer from $20,000 of reportable payments made to the taxpayer and 200 transactions to $600 (the same threshold applicable to other Forms 1099). Do you have clients working full- or part-time in the gig economy? Self-employed workers who drive for Uber or deliver food for DoorDash, who sell crafts and merchandise on Etsy, or who hire out their services on TaskRabbit? These budding entrepreneurs often get paid through mobile payment services like Venmo, Paypal or CashApp or get paid directly through the Uber or Doordash app.
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