The sharing economy, also commonly referred to as collaborative consumption, the collaborative economy, the gig economy or the peer-to-peer economy, has been a growing phenomenon in the United States job market. This relatively new trend is made up of contractors and freelancers, who are independent from the company that they work for. This line of work has been growing since the beginning of the millennium and has spread to cities across the United States.
However, many sharing economy workers are at risk of losing out on potentially large savings and returns because they are unaware of how to properly file their taxes. A new toolkit from The Center on Budget and Policy Priorities and the CASH Campaign of Maryland can help cities ensure that residents working in the gig economy keep more of their income at tax time.
This rapid growth and vast expansion of ride-hailing services in the economy has presented some challenges to transportation workers. Many drivers do not realize that for tax purposes, they are considered self-employed by the IRS. Because of this, many drivers do not track their business expenses and are unaware that they must pay self-employment taxes on top of their regular income taxes. This adds a whole new level of complexity to tax filing.
The toolkit is a useful resource for self-employed drivers to ensure that they are properly prepared for tax season by providing them with numerous tools that explain their tax status and how they can file their taxes correctly. It includes a step-by-step guide with items such as cheat sheets, a tax deduction tracking spreadsheet, a ride-hailing tax organizer which contains a filing checklist, and other deduction tools to aid drivers in calculating their taxes. It also includes links to required federal forms such as the 1099-K.
With tax season in full swing, cities can help ensure that more dollars end up in the pockets of these workers by sharing this tax filing toolkit, ultimately helping to create and sustain a healthy economic environment for all families in the city.
To access this toolkit, please click here. For more information regarding the future of work and labor growth in cities, please check NLC’s Future of Work In Cities Report by clicking here. For information on Volunteer Income Tax Assistance (VITA) sites and how you can help your residents claim the EITC, click here.
For more information about this toolkit or about city-led EITC outreach campaigns, contact Patrick Hain at (202) 626-3099 or hain@nlc.org.
About the Author:
Evan Elwell was the intern for the Economic Opportunity and Financial Empowerment team in the NLC Institute for Youth, Education, and Families.