What is the Sharing Economy and is it Taxable?
If you use one of the many online platforms available to rent a spare bedroom, provide car rides, or to connect and provide a number of other goods or services, you’re involved in what is sometimes called the sharing economy.
An emerging area of activity in the past few years, the sharing economy has changed how people commute, travel, rent vacation accommodations and perform many other activities. Also referred to as the on-demand, gig or access economy, the sharing economy allows individuals to generate revenue from assets they possess – (such as cars and homes) – or services they provide – (such as household chores or technology services). There are tax implications for the companies that provide the services and the individuals who perform the services.
This means if you receive income from a sharing economy activity, it’s generally taxable even if you don’t receive a Form 1099-MISC, Miscellaneous Income, Form 1099-K, Payment Card and Third Party Network Transactions, Form W-2, Wage and Tax Statement, or some other income statement. This is true even if you do it as a side job or just as a part time business and even if you are paid in cash. On the other hand, depending upon the circumstances, some or all of your business expenses may be deductible, subject to the normal tax limitations and rules.
The IRS encourages taxpayers participating in the sharing economy to understand the potential tax issues affecting them.
The following tax issues may apply to those participating in the sharing economy:
Issues for Individuals Performing Services
- Filing Requirements
- Employee or Independent Contractor
- Tax Payments, Including Estimated Tax Payments
- Self-Employment Taxes
- Rules for Home Rentals
- Business Expenses
- Receiving Form 1099-K, Payment Card and Third Party Network
The Internal Revenue Service urges anyone working in the sharing economy to perform a Paycheck Checkup now to avoid an unexpected tax bill when they file their return next year.
Many people working in the sharing economy need to make sure they pay their taxes either through withholding from other jobs they may have, or through estimated taxes.
The easiest way for most employees to check their withholding is through the Withholding Calculator available on IRS.gov.