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The Daily

Rise of Gig Economy Raises Tax Questions for Workers

Chris Gaetano
Published Date:
May 25, 2016
PhoneWorkers in what has colloquially been called the "gig economy," typified by companies such as Uber or Task Rabbit, frequently underpay or overpay taxes because, often times, they're not entirely sure how much, or even whether, they have to pay, according to Fast Company. In fact, 43 percent of workers in the on-demand economy don't set aside any money for taxes, and don't know how much they would need to pay even if they did. They also tend not to pay taxes every quarter, largely because they don't know that they need to.

A 1099 form might help shed some light on these questions, but Fast Company said that 60 percent of gig economy workers don't actually receive one. This makes them at risk for inadvertently underpaying taxes and incurring an audit some time later. On the other hand, Fast Company said some workers actually overpay taxes, as they're not aware of all the deductions and credits for which they are eligible.  

This situation could also be addressed if the companies behind these platforms provided training for their workers to let them know that, yes, you need to pay taxes and this is how much you need to pay, but Fast Company said companies are hesitant about this because it makes workers look too much like employees, which can lead to both legal liabilities and labor pressures. This would disrupt many of these companies' business models, as they rely on these workers definitively not being employees. If they were, they'd have to provide benefits, which would likely increase costs past the point where people would find them more convenient than the already existing alternatives. 

The IRS, aware of this issue, has said it will soon take action to clarify and adapt rules for these types of contractors, according to Fast Company, but has so far not offered specifics.