Gig economy workers still need to pay taxes. Here’s what to know

Gig economy workers still need to pay taxes. Here's what to know


If you haven’t yet entered the gig economy, there’s a fairly good likelihood that you will eventually, to earn extra income in retirement or to supplement your regular pay.

More people now drive at least part-time for ride-share services like Uber and Lyft, perform other freelance jobs, sell goods online and even rent out rooms in their homes.

Yet the tax-paying and record-keeping demands, and tax-shaving opportunities, for gig workers are different from what many people are used to as conventional employees, which leads to confusion.

“Besides many ride-share and delivery gig jobs, we are also seeing home health care workers, landscapers and personal assistants,” said Jim Simpson, a Scottsdale-certified public accountant who helps prepare tax returns for free under the Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs sanctioned by the Internal Revenue Service.

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In many cases, “We have to educate (these taxpayers) on allowable deductions and send them home to reconstruct records,” he said.

In the "gig economy," where people pull income from several sources rather than rely on going to work at a traditional employer.

In addition to confusion about allowable deductions, some gig workers aren’t fully reporting their income. The IRS is noticing this as it attempts to narrow the nation’s “tax gap” or difference between what taxpayers owe and actually pay.

“The gig economy has … emerged and grown considerably, with thousands of new taxpayers each year being responsible for self-employment taxes,” noted the Treasury Inspector General for Tax Administration, in a 2019 report. “It is likely that self-employment tax underreporting will continue to be a growing problem if not addressed.”


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