Getting to Know the Sharing Economy
How people commute, travel and/or rent vacation accommodations these days often involves an emerging area of activity — the sharing economy. Other ways of referring to it include the on-demand, gig or access economy, but no matter how you describe it, we're talking about individuals and groups that use tech advancements to arrange transactions to generate revenue from assets they already own, such as cars and homes. The sharing economy can include household chores or even technology services. You may think of this as a developing area in our economy, and the IRS is thinking of it also. There are tax implications for the individuals and companies that perform such services.
Let's look at the sharing economy more closely. You receive income from an activity, such as driving an Uber, for example. It's taxable, so don't think that failure of an employer to send you a tax form is a get-of-out-jail-free card. You still owe the government. You may say, well, it's a side job or part-time business. You may pooh-pooh the idea of owing taxes because you're paid in cash and your customers pay you in cash. That's not only illegal but also counterproductive, because some or all of your business expenses may be deductible anyway, subject to certain rules and restrictions.
Retirees also need to consider whether any activities they perform are considered "work" and thus may affect their Social Security status.
Here's an opportunity to understand the potential tax issues surrounding being a part of the sharing economy. You will not be surprised to learn that the IRS encourages this enlightenment. After all, it's an emerging area, and the agency itself, as well as tax professionals, are boning up on the tax issues related to the sharing economy.
Even the tax software industry is having to brush up its sharing economy chops so it can help people when they use the software to prepare taxes. Here are some tax issues all will need to consider if participating in the sharing economy.
Those performing a range of services need to consider:
- Filing requirements.
- Employee or independent contractor status.
- Tax payments, including estimated tax payments.
- Self-employment taxes.
- Depreciation issues.
- Rules for home rentals.
- Business expenses.
These tax issues need to be front of mind throughout the year — filing requirements in regards to the income you receive and/or dole out. And this includes payment received even if it's in the form of goods, property or services — not just money. These kinds of issues can crop up with Airbnb, for example. Sometimes, it's wrongly assumed that various "unconventional" transactions are tax-free. Be sure you know the rules.