The gig economy, also called sharing or access economy, is activity where taxpayers earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website. While there are many types of sharing economy businesses, ride-sharing and home rentals are two of the most popular.
Here are some things taxpayers should remember:
Income from these sources is taxable, regardless of whether an individual receives information returns. This is true even if the work is full-time, part-time or if an individual is paid in cash.
Taxpayers may also be required to make quarterly estimated income tax payments and pay their share of Social Security, Medicare or Medicaid taxes.
While providing gig economy services, it is important that the taxpayer is correctly classified.
This means the business or the taxpayer must determine whether the individual providing the services is an employee or independent contractor.
As taxpayers are getting ready to file their taxes, one of the first things
they’ll do is gather their records. To avoid refund delays, taxpayers should
gather all year-end income documents before filing a 2019 tax return.
It’s important for folks to have all the needed documents on hand before
starting to prepare their return. Doing so helps them file a complete and
accurate tax return. Here are some things taxpayers need to have before they
begin doing their taxes.
Social Security numbers of everyone listed on the tax return. Many taxpayers have these number memorized. Still, it’s a good idea to have them on hand to double check that the number on the tax return is correct. An SSN with one number wrong or two numbers switched will cause processing delays.
Bank account and routing numbers. People will need these for direct deposit refunds. Direct deposit is the fastest way for taxpayers to get their money and avoids a check getting lost, stolen or returned to IRS as undeliverable.
Any documents that show income, including income from virtual currency transactions. Taxpayers should keep records showing receipts, sales, exchanges or deposits of virtual currency and the fair market value of the virtual currency.
Forms 1095-A, Health Insurance Marketplace Statement. Taxpayers will need this form to reconcile advance payments or claim the premium tax credit.
The taxpayer’s adjusted gross income from their last year’s tax return. People using a software product for the first time will need their 2018 AGI to sign their tax return. Those using the same tax software they used last year won’t need to enter their prior year information to electronically sign their 2019 tax return.
Forms usually start arriving by mail or are available online from employers
and financial institutions in January. Taxpayers should review them carefully.
If any information shown on the forms is inaccurate, the taxpayer should
contact the payer ASAP for a correction.
Share this tip on social media — #IRSTaxTip:
Gathering records before preparing tax return makes filing go smoother. https://go.usa.gov/xdKB6
Changes To Using Per Diem Reimbursements To Employees For Expenses
This is important for the many employees in many industries where travel
requiring Hotel, Meals & Incidental expenses to be paid for the benefit of
the employer. With the suspension of
Miscellaneous itemized deductions for unreimbursed business expenses from 2018
– 2026, an employer and the employees should get to know the rules for proper
reimbursement and documentation.
Per diem rates cover Hotel/Meals/Incidental Expense or only Meals/Incidental
Expenses. There are also special rules for transportation industry workers and
Here is the excerpt on the new Revenue Procedure 2019-48:
Rev. Proc. 2019-48 provides the rules for using per diem rates, rather than actual expenses, to substantiate the amount of expenses for lodging, meals, and incidental expenses for travel away from home. Use of a per diem substantiation method is not mandatory. Taxpayers who use per diem rates to substantiate the amount of travel expenses under Rev. Proc. 2019-48 may use the federal per diem rates published annually by the General Services Administration. Rev. Proc. 2019-48 allows certain taxpayers to use a special transportation industry rate or to use rates under a high-low substantiation method for certain high-cost localities. The IRS announces these rates and the rate for the incidental expenses only deduction in an annual notice. Rev. Proc. 2019-48 will be in IRB: 2019-51, dated December 16, 2019.
Please check with your employer or financial advisor on the
applicability of how to properly report to avoid having any excess amounts
charged to income & subject to taxes or not be deductible for the employer.
With the new rules from the Tax Cuts and Jobs Act (TCJA) it is in the
employee’s best interest to utilize an employer reimbursement plan effectively.
Here’s what to know about the amount of a tax refund
After filing their tax return, a taxpayer
will know whether they are receiving a refund. Sometimes, however, a taxpayer’s
refund will be for a different amount than they expect.
Here are some reasons a taxpayer’s refund
might be less than they thought it would be:
Financial transactions happening late in the year can have an unexpected tax impact if a taxpayer’s 2019 federal income tax withholding unexpectedly falls short of their tax liability for the year. Certain transactions can affect 2019 tax withholding and influence the taxpayer’s anticipated refund next year. This includes things like:
o Year-end and holiday bonuses. o Stock dividends. o Capital gain distributions from mutual funds and stocks. o Real estate or other property sold at a profit.
If this happens, taxpayers can still make a quarterly estimated tax payment directly to the IRS for tax year 2019. The deadline for making a payment for the fourth quarter of 2019 is Wednesday, Jan. 15, 2020. Form 1040-ES includes a worksheet to help taxpayers figure the right amount of estimated taxes to pay.
A taxpayer’s refund can be used to pay other debts a taxpayer owes. All or part of a refund can go to pay a taxpayer’s:
o Past-due federal tax. o State income tax. o State unemployment compensation debts. o Child and spousal support. o Other federal nontax debts, such as student loans.
A taxpayer receives a notice if their debt meets the criteria for an offset. The IRS issues any remaining refund in a check or direct deposit as the taxpayer originally requested on the return.