In today’s economy, millions of Americans are doing whatever “side gigs” they can get- such as handyman work, running errands, driving for Uber, selling on Etsy, etc. – many of whom find work on sites such as TaskRabbit.com.
According to a recent publication by Thomson Reuters titled “Sharing Economy” Can Complicate U.S. Tax Filings, Uncle Sam is waiting for his cut from American Taxpayers who participate in such work.
The article states:
“According to recent data, Intuit, Inc., the owner of TurboTax tax-preparation software, estimates that 3.2 million Americans are already part of the sharing economy, with the number expected to grow to 7.6 million by 2020.”
However, many participants in the sharing economy are struggling when it comes time to prepare taxes as they did not keep proper records; they’re not separating those “business expenses” from personal expenses; and they’re not informed about IRS rules.
As with any business, it’s important to have a record keeping system in place and to make sure that you have help so that you won’t have an unexpected tax bill or worse. The last thing you want is to end up with a huge payment due, no funds to pay with and to be battling with the IRS.
Here are some tips to help you:
1. Talk to your Tax Preparer right away. You need to find out about IRS rules from a tax professional. The IRS continues to change rules and it’s important that you work with someone who stays up to date and who knows where you may or may not have a tax consequence.
- Are you renting out your home? The IRS allows you to rent your home for up to 14 days with no tax consequences. To read more about renting out your home Click Here .
- Are you bartering? If so, you should know that there is a value to those services and that it is considered taxable income. To read more about bartering tax requirements Click Here.
2. Have a Record Keeping System in place. Keeping your records organized is critical. Being “on the go” daily can make it more challenging. However, there are apps available to help you track expenses. Also, Intuit, Inc. offers their Quickbooks Self-Employed program online for a nominal monthly fee, which is ideal for more ideal for more complicated business expenses.
Every dollar counts and being organized can save you tremendous expense if you take the time to do it right. Also it’s a whole lot less stressful when you’re not scrambling at tax time.
3. Open a separate business account. One way to prevent getting into financial trouble with the IRS is to have a separate bank account for your business. Be sure that you don’t mix up the funds by paying for personal items either.
4. Set aside funds. A good habit to get into is to set aside 15% for taxes so that you don’t come up short at tax time. As we know business income can fluctuate so setting that aside when you have it can save you penalties and interest later.
If you would like assistance setting up your books or with tax preparation, give us a call at (800) 416-3820. Our Enrolled Agents and Certified Bookkeepers go through continuing education every year to make sure that you get the most up-to-date information.