The rise of the gig economy and part-time work means many more Americans are having to manage their income and income tax obligations themselves without the help of employer payroll systems. The IRS is aware of this and this week recalled the obligation to report all gig economy, service industry, digital and foreign earnings.
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In a March 1 disclosure on its website, the IRS stated that income from the gig economy is taxable and must be included on tax returns. This includes income from work, services or goods on demand – such as B. Selling products online – driving a car for deliveries or renting property.
You are required to report all income from gig economy and other work, including the following:
- Part-time, temporary or part-time job.
- Paid for in any form including cash, property, goods or digital assets
- Not reported on an information return form such as 1099-K, 1099-MISC, W-2 or other income statement.
The IRS also sent out a reminder to Americans working in restaurants, salons, hotels and other places where tipping is done. Tips are generally taxable income and can be paid in cash or non-cash. Cash tips should be reported to both employers and tax returns. Non-cash tips may include tickets, passes, or other goods or merchandise provided by customers to the employee. Non-cash tips are not reported to the employer, but must be declared on a tax return.
Any tips that are not reported to employers must be reported separately on Form 4137 in order to include them as additional wages on your tax return. You must also pay the employee portion of the Social Security and Medicare taxes owed on those tips.
The IRS also included information on reporting digital assets and foreign income. For digital assets, you’ll see a question about digital asset transactions at the top of Forms 1040 and 1040-SR. All taxpayers submitting these forms must tick either “yes” or “no.”
If you disposed of a digital asset that was held as a capital asset through sale, exchange, or transfer, check Yes and use Form 8949 to calculate your capital gain or loss. You then report it on either Schedule D (Form 1040), Capital Gains and Losses; or, in the case of a gift, Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.
Regarding foreign income, the IRS stated that a US citizen or resident alien’s worldwide income “is generally subject to US income tax” regardless of where you live. They are also subject to the same income tax obligations that apply to US citizens or aliens resident in the United States. This includes not only earned income, but also unearned income such as interest, dividends, and annuities from sources outside the United States, unless exempted by law or tax treaty. For more information on foreign income and taxes, see the IRS Tax Time Guide.
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For more information on reporting tips, visit the IRS Tipping and Reporting Website. For more information on the gig economy, visit the Gig Economy Tax Center website.
Finally, for more information on digital assets, see the instructions for Form 1040 and 1040-SR and the IRS’s Digital Assets page.
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