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Meeting Rental Application Requirements As Rideshare Or Delivery Driver

May 28, 2019/in Blog/by Sharon

Trying to rent an apartment as a young Uber, Lyft, or Doordash driver can be quite tricky. If you’re on the younger side, you likely do not have an extensive rental history. So this means that you do not have a lot of previous landlords that you can list as references when you’re applying for rentals. Younger people also have little credit and minimal credit history.

A lot of younger people are also single, which means they are going to be the only names that the landlords look at on the application. When two people are applying for a rental property, such as a couple, their dual income often makes it easier for them to meet any specified income requirements. Doing so can be more difficult with only one income to report.

No matter where you are in the US, most landlords require some income verification and a credit check at a minimum. For the income verification aspect, landlords mainly want to see proof of a consistent and reliable income. Many property managers expect evidence that you are making two-to-three times the rental cost monthly. Many freelancers have slow months, so showing a consistent income similar to that of a W-2 employee can be difficult. While proving that you have a reliable income as a freelancer can be difficult, it usually just takes a bit more creativity and a bit more effort to meet the property owner’s rental requirements.

Gather Your Information

If possible, gather up all your old check stubs and the last several months of invoices from your previous freelancing jobs. Feel free to black-out any private customer information. Make copies of the past year’s tax returns. Print out your current monthly bank statements. If your freelancing income has slow months or is somewhat sporadic, you can show the landlord several months worth of statements rather than have them focus on one month only. Providing three months worth of bank statements is often standard practice for rental companies.

Be sure to cover-up any private and unnecessary information on the bank statement print out. If you operate a business bank account, be sure to print out a monthly statement for these accounts too. You can also print out any relevant transfers from your business bank accounts to your personal accounts as well.

The key is to stay flexible and work with the property owners to clarify all of the proof of income that you can provide. Sure you might have to get creative, but there are usually always several ways to show that you make enough money to pay the required rent. Aside from considering traditional income verification methods like showing bank statements, tax returns, and recent invoices, there are other ways that you can prove your income to rental companies.

If you do freelance work for clients in addition to driving rideshare or delivery, one thing you can do is show any recent deal memos or any signed letters from clients.

Consider An Apartment Broker

Preparing all the relevant personal financial documents and presenting them to local property management companies can take a lot of time and effort. As a freelancer with a unique situation, you may want to consider having a broker assist you. The broker will prepare all of your financial documents and put them together in an attractive presentation. Brokers will communicate with local landlords about your situation, and they will find out if all of the papers that you can provide as a freelancer will be acceptable or not. While paying for a broker can be an unexpected rental cost, they can save you lots of time and money on things like visiting tons of different properties and paying multiple rental application fees.

Even with all this extra work and creativity, some landlords will not give you the time of day simply because you don’t have a signed letter from a company that proves steady employment. At least now you know you’re not entirely out of luck if you are trying to rent an apartment or home as a freelancer. In any given area there are usually plenty of rental options available to Freelancers. Freelancers may not always be able to get every apartment or house they want. Unlike W-2 employees, Freelancers do not usually have the luxury of renting from whoever and renting wherever they want.

Perhaps the one tip that most people in the freelancing business world will tell you is that you should always try to work with private landlords first. Large property management companies usually have stricter rental requirements than private landlords. However, finding private landlords can be difficult in specific areas.

Another final thing to consider would be offering to pay for an extra month or two in advance. Landlords might feel more confident and secure renting to a freelancer who can do so. However, this involves the tenants taking a bit of a risk on the rental property. Many things can go wrong in a month, and it may be difficult to get that money back that you paid in advance if you have to move from the apartment area suddenly.

The Truth About Making a Career Change to a Work at Home Business

May 14, 2019/in Blog/by Jane T

Far too many people grow frustrated with their regular job and want a change. The lure of building their own work at home business is strong, but most people do not understand the reality of making this type of career change.

If you want to be an entrepreneur and start your own home-based business instead of going to work for someone else for the rest of your life, look before you leap. The vast majority of businesses fail in their first year, something most people cannot afford. If you do not want that to happen to you, learn the right way to make a career change to a work at home business that will succeed.

Do Not Give Up Your Day Job

Although it might seem exciting to tell your boss goodbye and forge out into the world of business right away, this is a very poor decision for most people. If you have a very large financial safety net and perhaps a patient significant other with a sizable income, you could do this, but most people should start building their work at home business while still working outside the home.

Weeks or even months of research must happen before starting a home-based business. You could take a night class in entrepreneurship, website design, freelancing, or another topic of interest. Or you could learn everything you need to know on the internet. The important thing is to understand the reality of this type of career before you rely on it.

The Truth About Working at Home as a Business Owner

All the hype surrounding work at home opportunities puts the focus on high profits and working from anywhere with an online connection – even a tropical beach somewhere. You may achieve these things eventually, but it requires a lot of time and hard work to get there, or a lot of savvy business sense, investment money, and a healthy dose of luck.

The dream is real, but it is also a distraction from all the day-to-day grinding you will have to do to achieve it. A nearly infinite number of different company types exist, but they all come down to selling a service or product that someone actually wants. Figuring out what you are going to sell is just the tip of the iceberg, and it can be a challenge all on its own.

According to the Small Business Administration (SBA), nearly 540,000 new small business are launched every single month. A full 30% fail in the first two years of operation, and by year five, 50% of them are gone. While there are tons of reasons this is true, a big part may be that people just did not know what they were getting into.

Commit to a Lot of Work for the Long Haul

You might be sitting at your desk or on your couch right now thinking, “That won’t be me! I’ll be in the 50% that succeeds!” You absolutely can succeed if you start with the right education, tools, resources, and plan. Most of all, you need a commitment to doing what it takes to succeed for a long time even if you do not find that success right off the bat. This is another great reason to keep your day job and regular income while you build a new venture.

Entrepreneurship relies on passion. Choose a business type, product or service, and work style that you feel great about. That does not mean you will spend your days full of glee and happiness. Things get tough, but you can get through tough work times better if you have a fundamental enjoyment and appreciation for the work you do.

How long is the long haul? There is no way of predicting when you will succeed exactly, but if you do not have a plan and SMART goals to help you achieve on some sort of schedule, you will probably end up part of the sad statistics.

Business Plans and SMART Goals

Find a business plan template or instructions online and make one for your new company. These are necessary if you want to secure a small business loan, but they help even privately-funded ones start right and progress. The main components include basic information about the type of business, information about products or services offered, the target market analysis, your unique selling point (USP), funding sources, and financial estimations for the future. You need to know what you are selling to who, how, and how much money you can expect to make.

SMART goals focus on specific, measurable, achievable, relevant, and time-sensitive things you need to achieve. Instead of saying, “We’ll be making lots of money in six months!” you need to say, “We will increase our profits from our rainbow toe sock line by 20% before September 2019.” Then you need to track the goal and do what it takes to achieve it.

Create a Home and Office Divide Mentally and Physically

One of the reasons for at-home business failure is the inability to separate home time from work time. This is especially true for people who also take care of small children while they are supposed to work during the day. While working at home can be an amazing opportunity for stay-at-home parents to bring in some extra money, they need to create a physical and mental division between the two to get anything done.

The best scenario is a home office with a door you can close to get work done away from family life. If you do not have that, you need to protect your time. It is possible to train your family, except the youngest children and babies, that no one can bother you from 1:00 pm till 3:00 pm every day unless there is fire or blood. Create similar time slots throughout the week and come up with a way of letting everyone know you are unavailable for disputes over toys, making snacks, or having chats about homework or what your spouse did at their job during the day.

The Right Hardware and Equipment is Necessary

Any desktop or laptop computer that gets high-speed internet can help you start and run a home business. You might even be able to run one from your phone these days, although it might be awkward to do so. A dedicated work phone allows you to always answer with the right greeting instead of, “Hello? Gina is that you?” if you are expecting a call from your sister and a business contact at the same time.

The types of equipment, computer peripherals, mobile gadgets, furniture, and storage options you need depend on what type of work at home business you own.

Affiliate marketer? A home computer with internet access is good enough. E-commerce store owner? Add in storage shelves or bins for inventory. Freelance designer or artist? Invest in the best drawing tablet, camera, and graphic manipulation software you can buy.

For Life-Changing Money, Change Your Life

In the quest to be part of that 50% of small business that survive more than five years, only the strong, dedicated, hard-working, knowledgeable, and adaptable companies survive. Working from home requires a change in your lifestyle, schedule, and attitudes toward everything from continuing education to how and when you spend family time.

The internet is on 24 hours per day, every day of the year, and is not disappearing any time soon. You can reach consumers on the other side of the globe and market to people in diverse financial circumstances you may never have dreamed of reaching with a conventional business. Taking time off completely for a US or religious holidays may not work going forward if you want to stay engaged with your market. Your plan to show up for every single soccer game or piano lesson could suffer. These things would be just as impossible if you had a regular, real-world job too.

Starting your own work at home business may require more work and longer hours than you ever put in before. You might wonder at this point what the point is after all. Home business marketing pushes the idea of easy living and the freedom from a strict schedule. They show people lounging on the beach sipping daiquiris and occasionally glancing at their profit charts soaring on their smartphones.

When you make a career change to a home-based business, it is still work. The benefits come after the effort, and they are many. You get to do something you love every day. You can make your own schedules and change them whenever you need to, as long as all the work gets done. You can achieve financial comfort and independence on your terms and have something you can pass down to future generations. You will never get all these things if you stay working for someone else all your life.

Achieving Work-Life Balance as a Freelancer

May 9, 2019/in Blog/by Brandon

Freelancing offers unbeatable freedom in your career, but this flexibility comes with a major downside. It can be very difficult to maintain a sensible work-life balance, as boundaries become blurred and professional priorities soak up time which should be spent on relaxation and leisure.

Although there’s a natural desire to work as many hours as possible to keep income flowing, this isn’t sustainable in the long term. Without some downtime, your work will begin to suffer – not to mention your happiness, and even your mental health. How can you set about building a better equilibrium? Here are some ideas.

Create a Work Area

If you’re fortunate enough to have an actual office to work in, this is already a great start in separating your professional and personal lives. If not, it’s essential to set aside an area as a designated workspace. Even if this is just a particular chair at your dining table (not your usual one for mealtimes), defining a location for your work helps you to make the mental switch when you enter it. Crucially, try and keep this work area solely for professional use – for example, avoid using the same room as an office by day and a TV den by night.

Get Out Occasionally

This may seem like a direct contradiction of the previous point, but it’s useful to vary your work location occasionally if possible. Working from home can soon start to feel like imprisonment, with negative results for both work and leisure. Consider taking your laptop to a coffee bar or public park if this suits your line of work, but also make sure you arrange plenty of out-of-hours activities that give you a change of scene for a while.

Dress for Work

Even though today’s workplaces are increasingly relaxed, most people still make the effort to dress for work when heading out to the office in the morning. If you’re working at home as a freelancer, the temptation can be to stay comfortable in your pajamas or sweatpants, but it helps to establish boundaries if you change into something more formal. This doesn’t need to be full office wear, but few people are at their most productive in nightclothes, and changing back into casual clothing later acts as a natural marker for the end of the working day.

Segregate Your Technology

Smartphones are incredibly useful for the independent worker, allowing easy note taking, research, and communication wherever you happen to be. However, there’s a clear downside to constantly carrying your work in your pocket: it becomes impossible to fully relax. Ideally you’d have separate devices for professional and personal use, but this isn’t always cost effective.

Instead, if your device allows it, set up separate profiles for work and rest. When you’re working, you probably don’t want to see the Netflix icon on the same screen as your spreadsheet program, for example. Similarly, during your downtime, you don’t want your to-do list to be constantly in your gaze reminding you of fast-approaching deadlines.

You could also consider a smartphone that supports dual SIM cards, giving you separate numbers for work and personal use. This way, you can divert your professional calls to voicemail outside working hours.

Social and Family Boundaries

When you work from home, family and friends often assume you’re available for them at all times. You can expect demands to be placed on you which would never be made if you had a traditional job. It’s important to make it clear to everyone that work time is work time, and that anything that isn’t truly urgent should wait until after hours, just as it would if you were working outside of home.

Have a Realistic Work Schedule

Freelancing offers the flexibility to work extra hours to meet a deadline, or to organize your work around other responsibilities. However, it’s important to schedule reasonable work hours and manage your workload so that pulling a twelve-hour shift is the exception rather than the rule.

Replace Your Commute

Putting an end to the daily commute is one of the great joys of the freelance life. However, even though a long journey to the workplace is a huge inconvenience, it at least acts as a natural boundary at either end of the work day. Try and think of an equivalent that you can fit into your routine – maybe a short walk or a few stretching exercises, just to establish natural bookends to your professional hours.

Don’t Forget a Hobby

Lastly, many people become freelancers by turning a talent into a profession. Unfortunately, this often involves the destruction of a hobby at the same time. What was once a joy and a way of letting off steam is now the activity that’s paying the bills. If this applies to you, it’s essential to find a replacement, so that you have the opportunity for stimulation and diversion outside of your freelancing duties.

The freedoms a freelancing career provides are worth nothing if burnout damages your work and health. Establishing some solid boundaries will help you keep a happy work-life balance so that you can enjoy the unparalleled benefits of freelancing without it taking over your entire life.

10 Smart Budgeting Tips for Freelancers and Gig Workers

May 7, 2019/in Blog/by Brooke

Freelancing and gig work is bigger than ever before, and that is good news for young people and others who want to earn extra money. Whether you view freelancing and short-term gig assignments as a source of additional income or a replacement for a full-time job, you need to budget your money carefully.

Careful budgeting is important for everyone, but it is even more critical for gig workers and freelancers, who do not have a full-time wage to fall back on. Here are 10 essential budgeting tips freelancers and gig workers can use to stay in the black all year long.

Establish a baseline. Before you can establish a budget, you need to know how much you spend. Track your spending carefully to set the baseline for your new budget.
Track your income. Freelancing and gig work income can be notoriously uneven, and it is often feast or famine. Track your income carefully to get a sense for how much you can earn and use that in your budgeting.
Err on the low side of the income scale. If you overestimate your future income, you could end up with a serious shortfall. It is better to err on the low side and be surprised by a good month than the other way around.
Set up a separate bank account for your freelance and gig work. If you have a full-time job and use your gig work for extra income, be sure to keep those funds separate. This will help with taxes as well as budgeting.
Put money aside for taxes. The self-employment tax is a fact of freelance and gig work life, and you do not want it to take you by surprise. Estimate what you owe and set money aside for future taxes. If you earn enough, you may need to pay estimated taxes on a quarterly basis.
Lower your expenses. The lower your expenses, the easier it will be to stay within budget. Look for ways to reduce your expenses and keep more of your freelance and gig work income in your pocket.
Keep your receipts. One of the perks of being a freelancer or gig worker is that you can write off some of your expenses. Keep your receipts, sort business spending from personal and take advantage of those write-offs come tax time.
Start a retirement fund. It is never too early to save for retirement, so look into your options. Retirement plans for freelancers and gig workers are among the most generous around, and contributing to one could lower your taxes and help you save for the future.
Establish a line of credit. In a perfect world, your freelance and gig work income would always cover your expenses, but the world of self-employment is not a perfect one. Establishing a line of credit you can draw on can make the lean months easier – just do not abuse the privilege or get yourself in debt.
Focus on your most profitable clients. In the beginning, you may have no choice but to take every job that comes your way, but as you establish yourself you will have more freedom. By focusing on your best and most profitable clients, you can grow your business and build up your nest egg.

Budgeting is no easy task, and being a freelancer or gig worker can make things even more difficult. Without a full-time income to fall back on, you are responsible for every penny of income, and you need to make the most of those dollars. The budgeting tips listed above can help you enjoy the fruits of your labor, so you can enjoy the work and still put food on the table.

Uber Files for IPO, The Shift To Scooters, Highest Rideshare Tax Proposed

April 19, 2019/in Blog/by Jane T

This Week in Mobility – April 19, 2019

This week, Uber keeps IPO details confidential as it talks up investors, Phantom Auto attempts to expand into logistics with its latest funding round, and proposed rideshare tax debates heat up in Georgia.

Uber Woos Investors With Road Show for May IPO

After months of anticipation, the company that started the ridesharing industry began touring the country to talk up investors. Uber privately filed with the SEC for its IPO back in December, and little information is available about what the offering price will be.

This is the second ridesharing company to go public this year, and one of a handful of tech unicorns that are focusing on growth above profits. Uber CEO Dara Khosrowshahi stands to pocket a $100 million bonus if Uber’s valuation stays at $120 billion or higher for 90 days past the IPO.

Experts speculate that the Uber IPO could make Lyft stock more attractive since Lyft is a smaller company that had higher growth, and smaller losses. But growth doesn’t always translate to profits, and after the first day of trading, Lyft stock dropped significantly.

Uber lost over a billion dollars last year. While the platform is growing and the company is constantly seeking new markets and creating new services, growth for growth’s sake isn’t a sustainable long-term business solution.

Phantom Auto Expanding Remote Driving Operations into Logistics

While autonomous vehicles are making headlines with new AI that can drop a car virtually anywhere, Phantom Auto has been quietly working on remote control tech. The company recently raised $13.5 million in its latest financing round, for a total of $19 million since opening in 2017.

Phantom creates software that allows humans to remotely pilot vehicles in difficult traffic situations, bad weather, and other hazardous conditions. Using only a cellular connection, the company is now expanding into the logistics sector, driving everything from forklifts to semi trucks.

Though autonomous vehicles look promising, many companies have invested billions of dollars and still require human intervention on premises. Remote control technology flips this idea on its head, giving the software the ability to take over where humans often fail. It will be interesting to see what this does in the upcoming months.

Georgia Proposes The Country’s Highest Rideshare Tax in the US to Date

A proposal to amend HB 276 in Georgia legislature could tax riders up to 8.9% every time they use Lyft or Uber to catch a ride.

The potential law changes come after Georgia failed to collect sales tax from Uber back in December 2018. The Georgia Department of Revenue sent a $22 million tax bill to Uber for three years of uncollected sales taxes. Uber disputed the bill, stating there is no state tax on rideshare rides.

As ridesharing has become the norm around the United States, many government agencies are responding by creating or changing legislation in order to get a cut of the profits. Unfortunately, these taxes hurt drivers, riders, and the local economy.

While the final details of the bill haven’t been approved and Uber is still debating its tax liability, it may be safe to assume that rideshare taxes will become standard for most passengers in the US

From Bikes to Scooters: Are Mobility Companies Finding Their Sweet Spot?

Bike share is losing ground in popularity. Last year more people took rides on scooters, according to new research.

The dockless bike trend seems to be fading as it did in China. When the sudden surge in popularity began back in 2017, US and Chinese companies began popping up all over. Critics warned that the shine of dockless biking would wear off. When China pulled out of the US market last year, it essentially sealed the fate of profitable dockless biking services.

Though governments seem to be fully on-board with the program like Divvy in Chicago, are these programs destined to disappear? If so, it would be a blow to Lyft, who purchased Motivate, the largest U.S. bikeshare provider, last year.

While the answer seems to be yes, what works in the for-profit industry sometimes lingers past its prime in the nonprofit sectors. Mobility companies, including Lyft, have found a new, possibly profitable, venture in electric scooters.

The data seems to back this up, as The National Association of City Transportation Officials reported that scooter trips were higher than station-based bike share in the United States for the first time in 2018. Now, companies like Lime, Jump, and Lyft Scooters just need to work on scooter durability.

Native’s Recent Funding Proves On Demand Market Research to Be Valuable Business

Market research is the latest innovation in the on demand economy. Native, with operations led by former Uber staff, uses its platform to get market research in the trenches from locals. This research is vital to brands that rely on emerging markets and need up-to-the-minute pricing information in order to stay competitive. A recent $2.5 million funding round to manage its growth shows that its business model is working.

While Native is currently an outlier, this could be the start of the on demand economy becoming a mainstay of the B2B market.

Credit Karma Tax Review – Free Tax Filing Software

March 28, 2019/in Blog, Taxes/by Brandon

Heard of Credit Karma Tax? It’s Credit Karma’s free tax return software.

Their tax filing software may be a great option if you’re working for Uber, Doordash, Etsy, or another service, and you don’t want to pay $50 to $200 or more to file your taxes this year. Credit Karma launched their free tax software in 2016, but have improved it to the point that it now makes sense for most tax filing situations.

It currently offers most of the features of the big tax filing software players like Turbotax and H&R block, but with the added benefit of being free.

(Disclosure – We independently research our content to provide free advice for you. We may get compensation if you sign up with services, or purchase products through our affiliate links.)

What is Credit Karma Tax?

As noted above, it is the free tax filing software from Credit Karma, the free credit monitoring service with over 85 million users.

Credit Karma was founded in 2007 as a service providing free credit scores. In 2014, the company began offering full free credit reports to members as well, and is now the leading consumer credit monitoring service in the U.S.

While there are a number of free tax filing options out there, most of them are missing a lot of features, or aren’t totally free. Some will file your federal taxes for free, but charge you to file your state return. Other free tax filing options don’t work if you need to file a Schedule C or E form, a necessity for many Lyft, Uber, and Doordash drivers.

Is Credit Karma Tax free?

Yes, it is a totally free tax filing service. The service doesn’t even charge for filing a state tax return, audit defense, or having a small business.

The service also provides support for multi-member LLCs, S corporations, C corporations, partnerships, estates, and trusts!

Key Features

Free Audit Defense: Credit Karma Tax users will receive free audit defense. This service provides correspondence management and in-person representation in the event that a member gets audited by the IRS or the state. They are the only major tax filing software to offer audit defense for free.
Mobile Filing: Users can file their taxes, from start to finish, directly from their smartphone with every step now mobile enabled.
Easy Migration From TurboTax, TaxAct or H&R Block: New users can jumpstart their tax filing process by easily importing their prior year’s information
Error double-check: Before a member submits their tax return, Credit Karma Tax will check and re-check the return to let them know if anything looks off.
Personalized guidance: Once a member inputs their tax data, the app gives personalized guidance to help members maximize their refund, including helping them understand the impact of taking standard or itemized deduction and their filing status.

How Does Credit Karma Tax Make Money?

The software doesn’t actually make any money. In order to use it, you do need to join Credit Karma, a free credit monitoring service (disclosure: I’ve been using it for years). It’s been around since 2007, and helps you monitor your Transunion and Experian credit reports for free.

Credit Karma makes money by presenting loan and credit card offers to its users. When people sign up, Credit Karma gets some money from the loan or credit card company.

However, no advertising offers appear on the tax side of the software.

Pros And Cons Of Credit Karma Tax

Pros

Free Federal & State Filing
Free Audit Defense
Supports most tax situations including joint filing, and self employed schedule C filing.
Includes 1040 schedule C, 1040 schedule E, and 1040 schedule SE (self employment)

Cons – Does not support certain situations like:

Multi state tax return filings
Part-year state filing
Foreign earned income
State returns for married filing separately in community property states. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin are community property states.
State filing only

Credit Karma Tax also has weaker help and support options when compared with TurboTax and H&R Block.

Credit Karma Tax – Getting Started Walkthrough

Getting started is pretty easy. First, sign up for Credit Karma (it’s free) by clicking the button below.

Join Credit Karma

Once you’ve joined, you can start your tax return on their website or in the Credit Karma app.

1. To get started in the app, from the main dashboard, click on “Tax”.

2. This will bring you to the tax section of the app, which is free and has no ads. Click “continue”.

3.. The next step is to verify your phone number.

4. After that, you simply fill some info about yourself, and you can begin importing information and completing your Federal & State return. You can complete the entire process on the app, and since the software is free, you won’t even have to pull out your credit card.

How Does Credit Karma Tax compare to TurboTax and H&R Block?

Overall, it compares pretty well. While Turbotax does offer a free option, it only applies if your income is under $34,000, and their free option does not include Audit Defense.

H&R Block also has a free option, , but it does not support Schedule C forms, which most people who work for services like Postmates and Uber will need to fill out.

The only place Turbotax and H&R Block still have a major advantage is if your business or financial situation is really complicated.

If you own multiple businesses, or plan on filing multiple state returns, one of the paid offerings from Turbotax or H&R Block may be a better option. These options also come with superior customer support, with phone or chat options available.

Credit Karma Tax – Final Take

If you’re a gig economy worker for a service like Handy, Lyft, Care.com, or one of the other on demand services out there, Credit Karma Tax may be the free tax filing software you’ve been looking for.

It allows easy import from popular tax software, has most small business forms available, and is truly free in more tax situations than competing services.

To get started filing your Federal and State taxes for free, with Audit Defense included, simply click the button below.

Credit Karma Tax

IRS Paying Closer Attention to Gig Economy Workers Than Ever

February 28, 2019/in Blog, Taxes/by Jonathon C

According to a number of recent studies, the gig economy has evolved in a wide variety of interesting ways over the last few years. This is including a few which likely could not have been predicted at the start. As of 2018 about 34% of gig economy participants in the United States were full time. A full 84% of them are doing so exclusively. That number equals about 47.8 million people in the United States alone.

This comes during a time when not only are corporations and Fortune 500 companies frequently outsourcing non-core tasks to gig economy workers. 47% of Millennials have embraced the freelancing culture. Experts predict that by as soon as 2020 about 50% of the United States workforce will be freelancers.

Taxes, the IRS and the Gig Economy

In a traditional employee and employer relationship, an employer will withhold taxes from every paycheck for their employees. They will also make contributions to Social Security as well. When someone participates in the gig economy, this doesn’t happen. The worker is responsible for all tax-related matters, including various self employment tax and withholding requirements.

Want to file your Federal and State taxes for free?

Check out Credit Karma Tax by clicking the button.

Credit Karma Tax® is a premium product that’s 100% free for everyone, from start to finish, for both federal and state taxes.

Free Tax Filing

Recently, the Treasury Inspector General for Tax Administration issued a report about the importance of self employment taxes as outlined by the IRS. The IRS has an Automated Underreporter system, also known as the AUR, designed to help identify participants in the gig economy with discrepancies. It is designed to look at what they report on their income tax returns and what payments they actually received throughout the year on various 1099-K forms.

In an examination of the tax years 2012 through 2015, the report identified more than 264,000 different cases with potentially underreported payments. The data revealed that this was actually a problem that was getting worse over time. Underreporting increased a staggering 237% over the course of those four years.

While the program identified 264,000 discrepancies, nearly 59% were not moved through the system for further analysis. This was due to the sheer volume of potential issues that were being examined. The remaining 2,800 people who had potentially underreported their income for all four of those years. That total represents about $2.7 billion in underreported payments alone.

Source: Treasury.gov

A large part of this has to do with how payments are handled in the gig economy. If a gig economy worker is paid via PayPal, they must receive over $20,000 in a single calendar year AND do so via 200 or more transactions. If they don’t meet or exceed both of those thresholds, PayPal doesn’t issue a 1099-K. This means that their income isn’t being reported to the IRS at all.

According to that TIGTA report, whenever income is not reported to the IRS, taxpayers are far more likely to be noncompliant. This is true both accidentally and intentionally. The first scenario could still land someone in hot water by way of late fees and other penalties. The second is actually criminalized and is punishable by up to five years in a federal penitentiary for prison and a fine of up to $250,000.

It’s true that the IRS has no intention of jailing over 40% of the United States workforce. But at the same time, they want their money.

The Treasury Inspector General made a series of recommendations to the IRS about how to best handle this issue moving forward. One of the biggest involved the development of a strategic plan to address tax administration for the gig economy. That plan should also create increased visibility into the collection and assessment of self employment tax as well. A soft notice program was also recommended, aimed at gig economy workers with repeated noncompliance issues.

TIGTA also recommended a significant expansion of the AUR program to account for a wider array of taxpayer situations. This was including those who have a long history of high-dollar discrepancies. The IRS disagreed with this recommendation. Officials said that their current system was fine and that adding more scenarios would ultimately add minimal value to what it was already doing.

11 recommendations were provided throughout the report and the IRS agreed with all but two of them. This was interpreted to mean that as an organization they are aware that this is an issue and they’re searching for opportunities to do something about it moving forward.

Best Practices for Gig Economy Workers

All of this means that the IRS is absolutely going to pay closer attention to gig economy workers over the next few years in particular. Most people operating under this system will have absolutely nothing to worry about, even if accidental discrepancies are identified. For the best results, gig economy workers need to:

Keep the most detailed records possible.
Keep all receipts for expenses.
Keep track of your mileage especially if you do work for a company like Lyft or Uber.
Don’t try to do your taxes on your own if you are not capable of doing them properly.
Stay on top of quarterly estimated tax payments to avoid getting hit with a large tax bill at the end of the year.
Don’t forget about the self employment tax, which is an additional 15.3% tax on top of the income taxes you already owe.

These best practices will help make sure that gig economy workers have nothing to worry about. This is true even in the event of an IRS audit. They’ll be less likely to make mistakes in the first place. They can also prove that any that did occur were unintentional.

Side Hustle Taxes: Learn The Ropes, Avoid Penalties, Save Money

February 7, 2019/in Blog/by Don M.

The gig economy has exploded in recent years as workers from all walks of life take up a side hustle. In the US, almost a third of paid workers have a side hustle in addition to their main job.

They’re a great way to supplement your income, but you shouldn’t forget that the IRS wants their slice of the pie. The money you make on your side hustle may be taxable income, and if you don’t declare it, you could be in for an unpleasant surprise when the IRS catches on.

Our latest infographic reveals what you need to know about tax and the gig economy. Learn what you should declare, what will happen if you don’t declare your side hustle income, and — the best part — what you could save with side-hustle deductions.

Any good financial advisor will tell you that having more than one income stream is a good idea. Whether you’re earning to save or to spend, making a few extra dollars in your downtime can make a difference to your lifestyle.

Unfortunately, 33% of millennials aren’t giving the IRS its due, often because they’re unfamiliar with the tax rules for independent contractors, which is how side hustles like ride-sharing are categorized.

Declare everything

If you make money as an independent contractor, the IRS wants to know about it even if it’s just pocket money. It all counts and should be included in your income tax returns. Independent contractors should fill in a 1099 form to declare all the income earned on a side hustle.

Keep accurate records

If you want a smooth ride when tax season comes around, record everything you earn, as you earn it. You don’t want to have to spend hours sifting through receipts, invoices, and expenses as the deadline looms. There are many apps to help you track your side hustle income and expenses. Quickbooks Self-Employed and Hurdlr are among the best.

Don’t forget about deductions

Many of your side-hustle expenses are deductible. Track your business expenses throughout the year and declare them.

Tracked expenses can make a significant dent in your tax liability, so it’s vital that you keep good records. For ride-sharers, mileage is the big one, but you can also deduct other vehicle-related expenses, including insurance, depreciation, and maintenance. Other business expenses are deductible too, including tolls, health insurance, and parking fees.

Declaring your side-hustle earnings is an important part of running a business, however large or small it might be. The consequences of not declaring can be serious, with penalties that could wipe out a big chunk of your total income.