3 steps to help freelancers and gig economy workers avoid a tax blunder
(BPT) - More and more people are earning extra cash by freelancing in the sharing economy. That may mean writing on the side, playing music on the weekends, driving for ride-sharing services like Uber or Lyft or selling handmade jewelry on Etsy. No matter how the money flows in, gig economy earners must be aware of the related tax obligations and potential pitfalls.
"While it's easier now than ever to earn extra cash, it's important for freelancers and independent contractors to get smart about their tax responsibilities," said Mark Jaeger, director of Tax Development for TaxAct, a leading provider of affordable do-it-yourself tax software. "Gig economy earners must remember they are responsible for paying federal and state income tax on any income earned. And, they're also subject to self-employment tax, to cover Social Security and Medicare taxes."
If you're one of the 55 million Americans who chooses to freelance, it can be difficult to correctly calculate and report to the IRS how much tax you owe. In fact, a recent survey conducted by the National Association of Enrolled Agents found that, "independent contractors participating in the gig economy were cited as among those most at risk of failing to accurately report all of their income."