Managing taxes for gig work

The gig economy is activity where you earn income providing on-demand work, services or goods. Often this could be through a digital platform like an app or website.

Taxable income

You must file a tax return if you have net earnings from self-employment of $400 or more from gig work, even if what you earn is:

• From part-time, temporary or side work
• Not reported on an information return form – like a Form 1099-K, 1099-MISC, W-2 or other income statement
• Paid in any form, including cash, property, goods or virtual currency

You must pay tax on income you earn from gig work. If you do gig work as an employee, your employer should withhold tax from your paycheck. If you do gig work as an independent contractor, you may have to pay estimated taxes. 

What is gig work?

Examples of gig work include:

• Driving a car for booked rides or deliveries
• Renting out property or part of it
• Running errands or complete tasks
• Selling goods online
• Renting equipment
• Providing creative or professional services
• Providing other temporary, on-demand or freelance work

Note: This list does not include all types of gig work.

Digital platforms

Examples of work which match workers’ services or goods with customers via apps or websites include:

• Ridesharing services
• Delivery services
• Crafts and handmade item marketplaces
• On-demand labor and repair services
• Property and space rentals

Note: This list does not include all types of digital platforms.

What records to keep

To manage taxes for gig work as an independent contractor (self-employed), you need to collect and keep your records and receipts during the year. Recordkeeping can help you track your income, deduct expenses and complete your tax return.

• You need to keep records of money you received from gig work and sales, as you must report all income on your tax return even if you don’t receive Forms 1099 from the businesses that pay you.
• You need to save receipts of your expenses, as you can lower the amount of tax you owe by deducting certain expenses.

Paying estimated tax

It is critical that business owners correctly determine whether the individual providing services is an employee or independent contractor.

If you earn money for gig work as an independent contractor, you may have to pay quarterly estimated taxes. These are due four times a year:

• April 15 - for payment period January 1 – March 31
• June 15 - for payment period April 1 – May 31
• September 15 - for payment period June 1 – August 31
• January 15 - for payment period September 1 – December 31 of the previous year

How we can help

Taxes can be confusing and it’s important to get things right to avoid mistakes, a penalty by not paying enough tax or by paying late.

If you need help or advice with your tax preparation, contact us today for a free initial consultation. TaxAssist offers an expert professional advisory service. Inquire online here to book your free, no obligation consultation.

Date published Apr 26, 2022 | Last updated Jul 22, 2022

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.