By Susan Tompor
Detroit Free Press
WWR Article Summary (tl;dr) About 24 percent of American adults earned money selling something online, renting out their homes or spare rooms, or taking on a job, such as driving for a ride-hailing service. But how much do they know about the relevant tax rules? Columnist Susan Tompor breaks down what you need to know.
Detroit Free Press
The nasty secret of being a new entrepreneur is that your tax bill might be way higher than you’d imagine.
When you’re driving for Uber, delivering for Amazon, picking up freelance jobs or otherwise participating in the gig economy, you aren’t working for a boss who is required to withhold taxes from a regular paycheck. As a result, you’re subject to some fairly complex tax rules.
On-demand workers don’t have the luxury of only paying attention to income taxes in March or April, either. If you don’t pay enough taxes throughout the year, you could be hit with steep penalties.
About 24 percent of American adults earned money selling something online, renting out their homes or spare rooms, or taking on a job, such as driving for a ride-hailing service, according to a Pew Research Center study issued in 2016.
But how much do they know about the relevant tax rules? About 34 percent of those reporting earning income in the sharing economy did not know they needed to file quarterly estimated tax payments, according Nina E. Olson, the National Taxpayer Advocate, in a testimony in Washington, D.C., in 2016. The figures were based on a National Association of the Self-Employed survey.
And about 43 percent did not set aside money to meet their tax obligations or know how much they owed.
At tax time, the gig economy triggers plenty of bewildering questions for filers. So, where can an Uber driver make a wrong turn at tax time?