IRS OPTIONS FOR GIG ECONOMY

IRS options for gig economy. The IRS in memo IR-2021-97, reminded taxpayers in the gig economy and anyone claiming unemployment compensation in tax year 2020 of their options and how to meet tax filing and paying obligations. The Gig Economy refers to income earned providing on-demand work performing services or selling goods, including driving a car for booked rides or deliveries, renting out property, selling goods online or freelance work. Often, customers and service provider’s or sellers are brought together through a digital platform on an app or website. On the IRS website, under Gig Economy Tax Center on IRS.GOV you can obtain more information about proper withholding and estimated tax requirements, and they have a estimated tax calculator to help you determine how much tax to withhold. IRS options for gig economy.

A record number of Americans applied for unemployment compensation in 2020 due to the pandemic. Anyone who received unemployment benefits will need to report it on their tax returns. The American Rescue Plan, enacted on March 11, 2021, excludes from income up to $10,200 ($20,400 if married filing jointly) of unemployment compensation paid in 2020 for those with modified adjusted gross income under $150,000. Any amount over $10,200 is still taxable for each person. To determine if payments received for being unemployed are taxable, check out the Tax Assistant on IRS.GOV

The IR will recompute any credits and deductions claimed on the original return. However, if the reduction of income qualifies a taxpayer for a new credit not claimed on the original return, like the Earned Income Tax Credit, those taxpayers will need to file an amended tax return, Form 1040X, to claim the new credit. Unemployment benefit recipients should have received a Form 1099-G, Certain Government Payments, from the agency paying the benefits. The form will show the amount of unemployment compensation they received in 2020 in Box 1, and any federal income tax withhold in Box 4. Taxpayers who received an incorrect Form 1099-G or did not receive on at all, should contact the agency in charge of sending it to them.