Do Gig Work? You ALREADY OWN a Small Business
Do you drive for Uber or Lyft? Deliver for Doordash or Instacart? Sell handmade items on Etsy or eBay? Earn money through any other type of gig work?
Well, you might be surprised to learn that you ALREADY OWN A SMALL BUSINESS.
Armed with this knowledge, I have good news and I have bad news.
Bad News?
The bad news is that you will have to pay your own taxes.
Unlike an employee, whose boss withholds money for Federal, State, Medicare and Social Security, as a sole proprietor the responsibility falls on your shoulders.
Don't panic! If this is your first year performing gig work and you did not owe any money the previous year, then your chances of being penalized are very slim. However, there is a real possibility that you might owe this year.
What to Do
The best way to prevent having a balance due at the end of the year is to make estimated payments.
Simply go to the IRS website (irs.gov), create an account and submit quarterly payments in early April, June, September and January.
This will act as your withholding for the year and make sure you come out with a refund the next time you file.
What’s the good news?
The good news is that owning a small business means you now have the opportunity to write-off expenses.
Providing this information to a Tax Professional should allow them to significantly reduce your tax burden.
Most of the ride sharing and delivery apps do a great job of summarizing your expenses over the course of the year. However, I strongly recommend you keep records for yourself in order to receive the most tax breaks possible.
You could do this yourself, purchase bookkeeping software or hire a professional bookkeeper depending on your situation.
How to File
Gig workers are usually paid with form 1099-NEC.
Fortunately, these types of businesses do not have to file an extra tax return.
Instead, they generally file a Schedule C which is added directly to their 1040.
For assistance in processing this often complicated form, feel free to contact us at Marcellus Tax Planning where we specialize in reducing the tax burden of small businesses.