Tax Tips for the Sharing Economy
Those who use one of the many online platforms to rent a spare bedroom, provide car rides or a number of other goods or services may be part of what is called the sharing economy.
Here are several key points you should know about the sharing economy:
- Taxes. Sharing economy activity is generally taxable. It does not matter whether it is only part time or a sideline business, if payments are in cash or if an information return like a Form 1099 or Form W-2 is issued. The activity is taxable.
- Deductions. There are some simplified options available for deducting many business expenses for those who qualify. For example, if you use your car for business, you may qualify to claim the standard mileage rate, which is 53.5 cents per mile for 2017.
- Rentals. If your rent out your home, apartment or other dwelling but also live in it during the year, special rules generally apply. In some cases, you may not be required to report the rental income. In other cases, your deductions for expenses connected with the rental property may be severely limited. Call our office, and we will help you navigate these rules.
- Estimated Payments. The U.S. tax system is pay-as-you-go. This means that if you are involved in the sharing economy, you may need to make estimated tax payments during the year to cover your tax obligation. These payments are due on April 18, June 15, September 15, 2017, and January 16, 2018. Use Form 1040-ES to figure these payments.
- Payment Options. The fastest and easiest way to make estimated tax payments is through IRS Direct Pay, or use the Treasury Department’s Electronic Federal Tax Payment System (EFTPS).
- Withholding. If you are involved in the sharing economy and also an employee at another job, you can often avoid making estimated tax payments by having more tax withheld from your paycheck. File Form W-4 with your employer to request additional withholding. If you need help calculating the amount you should have withheld, help is just a phone call away.