In today’s gig economy, many people are earning a living from short gigs instead of steady jobs. While this works well for many people, how does it affect their taxes?
To make sure you do your taxes correctly, you should know what kind of employee you are. Does the company offering the gigs classify you as a full or part-time employee or a contractor? Employees have their taxes withheld from their paychecks, but contractors do not. This means that if you are a contractor, you will owe taxes on your income.
If you are a contractor, you need to receive a 1099 form from the company that hired you. However, some smaller companies won’t do this—either because you made less than $600 from that company, or because they may be unaware of tax laws. This doesn’t mean you can avoid reporting the income. All income must be reported, whether you receive the accompanying forms from employers or not.
If you do work for a lot of different companies, then you’re going to receive many forms for your taxes. Make sure to keep track of all forms and know if they are from employers or contracted companies. You’ll need to report all income from all sources, so good organization here is critical.
An essential tip for ensuring that you manage taxes efficiently is to treat yourself like an employee of yourself. From each paycheck for a contracted gig, immediately set aside the amount you will need for taxes. File all paychecks and personal notes about your income for easy access later. Just because your office may be your car or your bedroom doesn’t mean your files should be disorganized. Keep track of everything, and you can make the gig economy work for you.
Contact Armen Tax for more information about how you can make your gig income work for you and your taxes.