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IRS Launches Tax Hub for the Sharing Economy

Aug 29th 2016
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The IRS has created a new webpage to help taxpayers involved in the sharing economy find the resources they need to meet their tax-reporting responsibilities.

The new Sharing Economy Resource Center, which the IRS launched on Aug. 22, provides tips and information on a variety of topics, including tax-filing requirements, making quarterly estimated tax payments, self-employment taxes, and special rules for reporting vacation home rentals.

Also referred to as the on-demand, gig, or access economy, sharing economies enable individuals and groups to utilize technology advancements to arrange transactions to generate revenue from assets they possess, such as cars and homes, or services they provide, such as household chores or technology services.

Examples of sharing economy businesses include house-sharing platforms Airbnb and Couchsurfing, ride-sharing companies Uber and Lyft, and meal-sharing platform Feastly.

“This rapidly evolving area often presents new challenges for people engaged in these economic activities – whether they are renting a room or providing a ride,” IRS Commissioner John Koskinen said in a written statement. “The IRS is working to help people in this area by providing them the information and resources they need to file accurate tax returns.”

Here are a few key tax guidelines those involved in the sharing economy should keep in mind:

Taxes. Income received is generally taxable, even if the recipient does not receive a Form 1099, W-2, or some other income statement. This is true if the sharing economy activity is only part-time or a sideline business and even if the recipient is paid in cash, according to the IRS. However, depending upon the circumstances, some or all business expenses may be deductible.

Deductions. Speaking of deductions, there are some simplified options available for writing off many business expenses for those who qualify. For example, a person who uses his or her car for business often qualifies to claim the standard mileage rate, currently 54 cents a mile for 2016.

Rentals. Special rules generally apply to the rental of a home, apartment, or other dwelling that is used by the taxpayer as a residence during the taxable year. Usually, rental income must be reported in full – any expenses need to be divided between personal and business purposes, and special deduction limits apply. But if the dwelling is rented out fewer than 15 days during the year, none of the rental income is reportable and none of the rental expenses are deductible, according to the IRS.

Estimated payments. Because the US tax system is pay-as-you-go, people involved in the sharing economy often need to make estimated tax payments during the year to cover their tax obligations. These payments are due on April 15, June 15, Sept. 15, and Jan. 15, according to the IRS. Use Form 1040-ES, Estimated Tax for Individuals, to figure these payments.

Withholding. People involved in the sharing economy who are employees at another job can often avoid needing to make estimated tax payments by having more tax withheld from their paychecks. File Form W-4, Employee’s Withholding Allowance Certificate, with the employer to request additional withholding.

The IRS developed the Sharing Economy Resource Center in conjunction with the National Taxpayer Advocate.

Related article:

Untangling the Tax Rules for Vacation Home Rentals

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