Uber, Lyft, Airbnb, Etsy, Rover, TaskRabbit. If you have used these services–or provided services to allow them to others–you’re a member of the sharing economy.
If you’ve only used these services (and not provided them), as there are no need to worry about the tax implications but when you’ve rented out an extra room within your house via a company like Uber or Airbnb you happen to be probably collecting a fee–a portion of which matches for the provider (on this example, Airbnb) and a portion which you keep for providing the service. But whether Payroll in Schaumburg ‘s your full-time gig or a part-time job to make some extra cash, you should be conscious of the tax consequences.
Millennials would be the primary users of the sharing economy but Gen X and Boomers use it too; along with a recent PWC study found that 24 percent of boomers, age 55 and older, will also be providers. Although people are trying to earn some extra money, some dive in it full-time hoping they can earn a living, and still, others simply enjoy meeting new people or providing a site that assists people. What most people don’t get are these claims extra money could impact their taxable income–especially should they have a full-time job within a company.
Put simply, that more income might are a tax liability once you find out your goverment tax bill. To avoid surprises at tax season, it’s more important than ever before to be proactive to understand the tax implications of the new sharing economy gig and consult a reliable tax professional.
Tip: For those who have a job with an employer make sure your withholding reflects any extra income based on your side gig (e.g. boarding pets at your house . through Rover or driving for a ride-share company like Uber on weekends). Use Form W-4, Employee’s Withholding Allowance Certificate, to create any adjustments and submit it to your employer who will put it to use to find the quantity of federal taxes being withheld from pay.
New company Owner
When you might not necessarily think about yourself like a newly self-employed company owner, the IRS does. So, while you sort out a company like Airbnb or Rover, you might be considered a business owner and are responsible for your own personal taxes (including paying estimated taxes if you want to). It’s up to you to help keep tabs on income and expenses–and of course, to keep good records that substantiate your income and expenses (read more about this below).
Note:In the event you receive income from the sharing economy activity, it’s generally taxable even if you don’t receive a Form 1099-MISC, Miscellaneous Income, Form 1099-K, Payment Card and Third Party Network Transactions, Form W-2, Wage and Tax Statement, as well as other income statement.
And today, for your good news. Like a company owner, you are eligible for certain deductions (at the mercy of special rules and limits) that you cannot take as an employee. Deductions reduce the level of rental income which is at the mercy of tax. You might also have the ability to deduct expenses related to enhancements made just for your friends and relatives. As an example, if you rent an area in your apartment through Airbnb, amounts you may spend on draperies, linens, or even a bed, could possibly be deductible.
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