If You Did Gig Work in 2021, the IRS Says You Owe Taxes

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If you made money from a full-time job or a side hustle last year, then you’re required to report those earnings on your 2021 income tax return. The IRS also offers several resources to help gig workers meet their tax obligations.

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You may or may not receive an information return; however, all earnings from gig work are taxable. The law concerning Form 1099-K also changed for payments received in 2022 to totals exceeding $600, regardless of the number of transactions. For income earned in 2021, the reporting requirement was $20,000 in aggregate payments and 200 transactions.

As a gig worker, it’s also important to be correctly classified either as an employee or an independent contractor. Your classification could mean that you’re required to make quarterly estimated income tax payments, according to the IRS, including your share of Social Security and Medicare taxes.

Are You an Employee or an Independent Contractor for Tax Purposes?

Independent contractors are considered self-employed and are also subject to self-employment tax. Self-employed individuals are generally required to file an annual return and pay estimated tax on a quarterly basis. However, self-employed individuals may also be able to deduct business expenses, such as a deduction for mileage on your car — if it’s used for business purposes — or a home office deduction. What you can deduct (and how much) depends on tax limits and rules.

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You are considered an employee if you perform services that can be controlled by an employer, such as what will be done and how it will be done. As an employee, your earnings are generally not subject to self-employment tax — but your earnings as an employee may be subject to FICA and income tax withholding.

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If you’re unsure of your classification, you can file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. The IRS will review the information and circumstances and determine your tax status. 

You can also check out the Gig Economy Tax Center on IRS.gov for more information on your tax responsibilities.

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About the Author

Josephine Nesbit is a freelance writer specializing in real estate and personal finance. She grew up in New England but is now based out of Ohio where she attended The Ohio State University and lives with her two toddlers and fiancé. Her work has appeared in print and online publications such as Fox Business and Scotsman Guide.
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