A college student wanting to do something other than wait tables. A teacher needing to make a little extra money. A family wanting to rent out their home while they’re on vacation. These are just a few examples of taxpayers making money from the sharing economy who should consider how this income affects their taxes.
Here are some key things for taxpayers to know about participating in the sharing economy:
Taxes. Sharing economy activity is generally taxable, including
- Part-time work
- A side business
- Cash payments received
- Income stated on a 1099 or W-2
Withholding. Taxpayers involved in the sharing economy as an employee might want to review their withholding from that job and any other jobs they might have. They can often avoid making estimated tax payments by having more tax withheld from their regular paychecks. These taxpayers can file Form W-4 with their employer to request additional withholding. They can also use the Withholding Calculator on IRS.gov. This tool helps them check if they’re having too much or too little tax withheld from their income.
Estimated Payments. Taxpayers can pay as they go, so they don’t owe. One way that taxpayers can cover the tax they owe is to make estimated tax payments during the year. These payments can help cover their tax obligation. Taxpayers 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. Taxpayers can also use the Treasury Department’s Electronic Federal Tax Payment System.