(BPT) - The idea of making “extra” money is nothing new, but the ways to make money in the gig economy have evolved. For example, a recent increase in demand for restaurant delivery drivers, grocery shoppers, delivery services and other service positions allows some people to stay at home due to COVID-19. With the tax deadline approaching, those who picked up new gig economy work or took on multiple jobs in 2020 now face questions about how to file their taxes, including deciding which filing option to use.
“The pandemic brought changes to many people’s work. We know they have questions about filing with 1099s, many for the first time,” said Kathy Pickering, chief tax officer at H&R Block. “Knowing that the income reporting paperwork they receive might be different than what they are familiar with is an important component to managing this year’s tax filing. Working with a qualified tax professional can help them understand the new documents and how to navigate filing with their gig income.”
For those filing their own taxes, H&R Block’s DIY options are infused with human expertise. For more help, H&R Block Online Assist provides unlimited, on-demand chat sessions and screen share. Plus, after they complete their return it can be sent to a tax expert for a full review.
Who are gig workers, or what qualifies as gig work?
To put it very simply, the gig economy category also includes selling or reselling products and providing professional services. The work is typically done on a freelance or on-demand basis. Gig work isn’t limited to delivery and ride-share employment, which tends to be facilitated by digital platforms (apps). Gig workers may not realize, but when it comes to taxes, they’re self-employed.
What paperwork do gig workers need to file?
If the work is being done as a company employee, gig workers will receive a W-2 detailing how much they were paid, how much was withheld for taxes and any benefits they received. For these gig workers, this could be the only additional paperwork they need to file an accurate return.
If the gig worker is considered an independent contractor, they will receive a Form 1099 listing how much they earned, but not how much was withheld for taxes. Instead, these workers are responsible for paying their taxes directly to the IRS and their state revenue department. They should also make quarterly tax payments during the year to avoid a penalty. When they file their tax return, they may be eligible to deduct some business expenses, including advertising, internet service and mileage. To determine how much they can deduct, they will need to gather their receipts for eligible expenses.
In some instances, no paperwork detailing how much was earned is given to the gig worker. In that case, they are responsible for accurately calculating how much they earned, filing a tax return and paying self-employment tax if they have earnings of $400 or more.
No matter how the income is reported, myBlock app users can upload their receipts and other paperwork year-round for convenient, electronic storage, which can make filing go more smoothly. To get started on your tax return today, explore these H&R Block tax filing options.
