The term “sharing economy” refers to those who provide goods or services through online platforms. The options for employment in this market are seemingly endless. Some offer transportation services through Uber; others sell homemade goods on Etsy. The platforms that offer employment in this market are alluring for a number of reasons. One of the benefits is the convenience of employment without the restrictions common in typical jobs.
Although this type of employment can offer a quick and fairly easily earned bit of cash, it is also important to keep Uncle Sam in mind.
When do taxes apply in the sharing economy? In some cases, taxes may be due on this form of income. Those who take part in the sharing economy as self-employed workers are often considered independent contractors in the eyes of the IRS. This means that they may need to pay a self-employment tax.
Can I get a deduction? There are situations when those who rent out their property can get a deduction for qualifying expenses. This includes some costs connected to maintenance, insurance, real estate taxes and mortgage interest. The exact amount depends on a number of factors, including whether or not you also live in the residence you are renting.
For those that partake in driving services, business deductions for car washes, tolls, parking fees and other auto expenses may apply.
Are there other considerations? Other obligations or considerations may apply. The exact tax implications depend on each individual situation. It is wise to keep copies of all bills associated with the business to help better ensure you are in compliance with applicable tax laws while also increasing the odds that you can take advantage of all potential tax savings.
If you are contacted by the IRS in regards to tax obligations, it is wise to seek legal counsel. An experienced attorney can review the correspondence and provide guidance on the best way to proceed.