Tax Essentials for Gig Workers: How to Stay Compliant and Save Money

The gig economy offers unparalleled flexibility, but it also brings unique tax challenges. Whether you’re driving for a rideshare service, freelancing online, or delivering food, understanding your tax obligations is crucial to avoid penalties and maximize savings.

Key Tax Requirements for Gig Workers

1. Self-Employment Tax

   • Gig workers are considered self-employed, responsible for Social Security and Medicare taxes, totaling 15.3% of net earnings.
     

2. Estimated Tax Payments

   • To avoid underpayment penalties, gig workers must make quarterly estimated payments.
     

3. Tracking Income

   • Platforms like Uber or DoorDash issue 1099-NEC or 1099-K forms, but all income—even below $600—must be reported.
     

Maria, a rideshare driver earning $40,000 annually, uses a mileage tracking app and deducts $8,000 in vehicle expenses. This lowers her taxable income, saving her over $1,200 in taxes.

Pro Tips for Compliance

• File Schedule C for business income and expenses.

• Use IRS Form 1040-ES for estimated payments.

• Keep detailed records of all income and expenses.
  

How Arc&Ledger Can Help Navigating gig economy taxes can be tricky, but we’re here to help. Contact us for personalized tax solutions tailored to your needs.