Tax Implications Of The Sharing Economy
April 5th, 2018
If you are an Uber or Lyft driver, rent out a room through Airbnb or provide a number of other goods or services through an online platform, you are involved in the “sharing economy.” This is also known as the on-demand, gig or access economy. In the last few years, the sharing economy has emerged as an area of activity that has changed the way people commute, travel, rent vacation accommodations and perform other activities, such as household chores or technology services.
Here are some of the potential tax issues you should consider if you engage in a sharing economy activity.
- Any income you receive through a sharing economy activity is generally taxable even if you don’t receive a Form 1099-MISC, W-2 or some other income statement.
- Even if you perform the activity as a side job or part-time job, and even if you receive cash, this is all reportable income.
- On the other hand, some or all of the expenses you incur in order to perform the activity, may be deductible.
- Since taxes are not being withheld from the income you earn, you should be paying estimated tax payments each quarter to the IRS. If you wait until your tax return is prepared to pay the taxes, you may not be able to afford the amount you owe. In addition, you will receive a penalty for not making the quarterly estimated tax payments.
Remember to keep good records to substantiate the income and expenses you report on your tax return. This will help you if the IRS audits your return.