All of a sudden an Uber driver, for example, would be considered self-employed and is now required to file a Schedule C with their tax return.
Uber. Lyft. Airbnb. These are names that are ubiquitous now, but just 10 years ago these companies did not even exist. The rapid emergence of technology, coupled with a desire to help others while earning an extra buck, has led to a surge in the “sharing economy.”
Often times, people are so eager to jump into a new venture, taxes do not even cross their mind. And that’s perfectly okay. That is, it’s okay for everyone except your accountant! All we ask for is a quick e-mail. Starting to drive for Uber? Better start a mileage log. Renting a room on Airbnb? Hold onto those receipts! These small items are often overlooked but could help you save hundreds in taxes if done properly.
After working for a couple large regional CPA firms, I started my own CPA firm in 2015 and decided to specialize in tax issues facing the sharing economy. Largely, this means educating others about what their tax obligations are, informing them about what it means to be self-employed, and/or helping them prepare their tax returns. It’s no small feat. Most taxpayers are used to just receiving a Form W-2 for wages and maybe a couple Form 1099s for interest or dividends. All of a sudden an Uber driver, for example, would be considered self-employed and is now required to file a Schedule C with their tax return. For those drivers netting substantial profits, they may be required to file quarterly estimated tax payments to avoid underpayment penalties. These are just a couple of the many issues facing drivers today.
To make it even more complicated, the bulk of the “current” tax code was written about three decades ago. There have been countless additions, revisions, and clarifications over time, but everything is supposed to fit into the current code one way or another. Many sharing economy items are not obvious and do not have a clear-cut answer. This can make it quite a challenge — even for your local tax CPA.
When I’m not helping my clients, I’m likely researching emerging tax trends to try and stay on top of everything going on. That is how I came across Taxfyle and became a Taxfyle CPA. In fact, some of the very tax returns I prepared on Taxfyle involved sharing economy issues. Individuals, and tax practitioners alike, should be ready because the sharing economy is here to stay.
Joseph Starzyk CPA, Blogger, New Dad!
