Check System
Send us your comment!

Your comment will be read by our web staff, but will not be published.

Please do not enter any personal information. Your comment is voluntary and will remain anonymous, therefore we do not collect any information which would enable us to respond to any inquiries.

However, IRS.gov provides a How to Contact the IRS page where you will find guidance on where to submit specific questions.



ShareThisPresentation
CopyAndPasteTheFollowingUrlToShareThisPresentation
ToEmailALinkToThisPresentationClickTheFollowingEmailLink
Bookmarks
ThisProgramWritesASmallCookie
This is an IRS
audio presentation.

To view this page, ensure that Adobe Flash Player
version 10 or greater is installed.

Get Adobe Flash player

Slides PDF

EARLINE BROWN: I see it's the top of the hour, so we'll go ahead and get started. Welcome to today's webinar, Understanding the Gig Economy. We're glad you're joining us today. My name is Earline Brown, and I am a Stakeholder Liaison with the Internal Revenue Service and I will be your moderator for today's webinar which is slated for 60 minutes. Before we begin, if there's anyone in the audience that is with the media, please send an email message to the address listed at the bottom of this slide. Be sure to include your contact information and the news publication you're with. Our Media Relations and Stakeholder Liaison staff will assist you and answer any questions you may have. As a reminder, this webinar will be recorded and posted to the IRS video portal in a few weeks. This portal is located at www.IRSvideos.gov. Please note, continuing education credit or Certificates of Completion are not offered if you view an archived version of our webinars on the IRS Video Portal. Technology problems, in case you do experience a technology issue, this slide shows helpful tips and reminders. We've posted a, Technical Help, document you can download from the, Materials, button on the left side of your screen, and it provides the minimum system requirements for viewing this webinar along with some best practices and quick solutions. If you've completed and passed your system check and you're still having problems, try one of the following. The first option is to close the screen where you're viewing the webinar and re-launch it. And the second option is to click the gear icon.

Now some of you may not see the gear icon, it depends on your web browser. If you do have it, the gear icon will be in the top right corner of the slide and photo boxes. You'll be given two choices, select, Flash, instead of, HLS, from the available media box. You should have received today's PowerPoint and a reminder email, but if not, no worries. You can download it by clicking the, Materials, button located on the left side of your screen as shown on this slide. A resource document is available for you to download as well Closed captioning is available for today's presentation. If you're having trouble hearing the audio through your computer speakers, please click the, CC, button on the left side of your screen. This feature will be available throughout the webinar. During the presentation, we'll take some breaks and share knowledge-based questions with you. At those times, a polling style feature will pop-up on your screen with the question and multiple-choice answers. Select the response that you believe is correct by clicking on the radio button next to your selection and then clicking submit. Some people may not get the polling question. This may be because you have your pop-up blocker on, so please take a moment to disable your pop up blocker now so you can answer the questions. Also, if you have a topic-specific question today, please submit it by clicking the, Ask Question, button. You do this by answering your question in the text tab and then clicking, Submit. Very important, please do not enter any sensitive or taxpayer specific information. Moving along with our session, let me introduce today's speakers, Sherry Saucerman and Karen Brehmer, a tech specialist with the Internal Revenue Service in the Communications and Liaison Division. Both work with tax professionals and small business owners in their respective areas, providing outreach and education and identifying ways the agency can be more responsive to customers' needs. Now I'm going to turn it over to Sherry to begin the presentation. Sherry? SHERRY SAUCERMAN: Thanks, Earline. And for those of you who are that are hearing a clicking noise, we are working as well as we can to try and get rid of it. It's not somebody's tapping. So, let's get on with our webinar. If you use one of the many online platforms available to rent out a third bedroom, provide car rides, or connect with customers to provide other goods or services, you're involved in what is sometimes called the gig economy. And just like any other job, money earned through the gig economy is taxable. An emerging area of activity in the past few years, the gig economy, and that's also sometimes referred to as the on-demand, sharing, or access economy, it's changed how people commute, travel, rent vacation places, and perform many other activities. Gig economies allow individuals and groups to use technology to arrange transactions that generate revenue from assets they possess such as boats, homes, or from services they provide such as rides, household chores, or technology services. Now, before we get started, I do need to mention that this presentation is informational only. It is not intended to provide you with tax advice on your specific factual situation. Rather, the presentation is intended to provide you with general information about those tax issues that arise in the gig economy. Now during today's webinar we'll be discussing what is the gig economy? How does a gig worker know if they're an employee or self-employed? We'll talk about business expenses and record keeping for gig workers, we'll discuss the rules for home rental, tax payment options for gig workers, and then we'll finish up with a live Q&A. Now if you use an online platform to provide services such as renting out a spare bedroom, providing car rides, or connecting with customers to provide other goods or services, you're involved in the gig economy. The IRS developed the Gig Economy Tax Center to help you meet your gig economy tax obligations. There's a link to the Gig Economy Tax Center in the resource document for today's webinar. There are tax implications for both the company that provides the platform and the individual who provides the, who performs the services. If you offer services in the gig economy, you must understand the potential tax issues that may affect you, and the Gig Economy Tax Center provides information to help guide you through common tax questions. You know, many tax professionals can help as well, and the tax software industry is aware of this new business model so many software programs are prepared to assist you when you prepare your taxes. Now one of the first considerations is how you treat the money you earn for tax purposes. You provide services in the gig economy. You may be an employee who then generally must pay the employee's portion of the Social Security and Medicare taxes in addition to income taxes on the wages you earn. Self-employed individuals pay the full amount of Social Security and Medicare taxes, plus the income taxes on their net income. Now generally, you're going to be considered self-employed if any of the following apply to you, you carry on a trade or business as a sole proprietor or an independent contractor, or you're a member of a partnership that carries on a trade or business, or you're otherwise in business for yourself, and that does include part time businesses. To decide whether the business you provide services for is exercising the type of control that would classify you as an employee, you need to look at the facts in these three categories, those categories that are on the screen here. First of all, behavioral control, does the business control, or have the right to control, what you do and how you perform the services? Then there's financial control, financial control focuses on whether the business has the right to control the business aspects of a worker's job. Some factors of financial control include such things as, does the business you work for control how you're paid and whether expenses are reimbursed? Who provides equipment, tools and supplies? Then there's the type of relationship. Are there written contracts? Does the business you work for provide employee benefits such as a pension plan, insurance, and vacation pay? Will the relationship continue and is your work a key aspect of the business you work for? Now, it's very important that you consider all the facts, there's not one single fact that provides an answer. We don't have time in today's webinar to discuss worker classification in detail, but if you're not certain whether you're an employee or an independent contractor, you may wish to review Publication 1779, Independent Contractor or Employee. You can also complete and submit the Form SS-8 which is the Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, long name. You complete that form and submit it to the IRS to have us make a determination on your employment status. OK, Earline, I think it's time for our first polling question. BROWN: Yes, Sherry, it is. Audience, as a reminder, please ensure you have disabled your pop-up blocker so you can answer the questions. Our first polling question is, how do you determine if you are an independent contractor or employee? A, you get to decide, B, you create a contract that says you are an independent contractor, C, you look at behavioral control, financial control, and type of relationship, or D, none of the above. Please take a minute and review the question again. Then click in the radio button you believe most closely answered this question. We'll give everyone a few more minutes, few more seconds, rather, to answer this question. OK, we're going to stop the polling now and we'll show the correct answer on the next slide. And the correct answer is, you look at behavioral control, financial control, and type of relationship. That's C. And I see that 95 percent answered correctly. That's a great correct response rate. Karen, can you discuss how the classification of workers affect the business operating the online platform? KAREN BREHMER: Sure, Earline, I'd be happy to do that.

So now we're going to discuss the responsibilities of the business operating the online platform. Sherry just told us that gig workers need to figure out if they are an employee or an independent contractor, and the same is true if you have a company that offers a platform for gig workers. You need to determine if the people who provide services for you are employees or independent contractors. The business is equally responsible for determining whether it's hiring employees or independent contractors. This is a really important question for taxpayers who are paying others for providing their services in the gig economy. Before you can determine how to treat payments that you make for services, you must first know the business relationship that exists between you and the person performing the services. To do that, the business owner needs to look at behavioral control, financial control, and the type of relationship. Those are the same tests that Sherry mentioned earlier in today's presentation. If you aren't certain of the employment status of the people providing services for you, you can use the helpful links on the Gig Economy Tax Center page on IRS.gov or you can submit Form SS-8, that's the form, again, that Sherry referred to earlier. The title is, Determination of Worker Status for Purposes of Federal Employment Tax and Income Tax Withholding. So that form can be submitted by the business owner or it can be submitted by the worker, either one. They can submit Form SS-8 to the IRS to obtain a determination on the employment status of the workers. The classification of the gig economy worker determines what information returns should be issued and filed and also what types of taxes apply and what returns should be filed. If the gig worker is self-employed, the business owner will submit certain forms. If the gig worker is an employee, the business owner is going to be submitting different forms. And we're going to talk about those forms on the next slide. But before I do, let me tell you again about some of the helpful links on the Gig Economy Tax Center page of IRS.gov. You'll find information there about, to help you determine if the worker is an independent contractor or an employee. There's also a link to the Self-Employed Individuals Tax Center, there's a link to general employment tax issues, and there's a link to that Form SS-8 that referred to, we referred to earlier. I'm going to address one question that came in real quick. Some people just asked, "What does gig stands for?" It's not an acronym, it's just a word. And it's a word that people in the gig economy tended to use.

I got a gig, I got a job, I got a thing going on. So, it's not a tax term, we're borrowing it from popular culture, I guess you'd say. So, the proper classification of the gig economy worker determines what information returns should be issued, what taxes should be withheld, the type of tax returns that needs to be filed, and the types of tax liabilities that will need to be paid.

So, here's what you need to know if you determine that the gig worker is an independent contractor. If you make payments for non-employee compensation, you're going to use Form 1099 Miscellaneous to report the payments you made in 2019. Another form you need to know about its Form 1099-K. A company operating in a digital platform might need to file Form 1099-K. The title of that one is, Payment Card and Third-Party Network Transactions. It's used by credit card companies and third-party processors like PayPal and Amazon to report the payment transactions that they process for retailers or other third parties. So, if you operate a gig platform, you might need to issue Form 1099-K to the workers if you processed credit cards, debit cards, or prepaid cards in order to pay money to the gig workers. So, here's what you need to know if you determine that your workers are employees, because that's a whole different situation.

Employers need to pay wages and withhold income tax and Social Security and Medicare taxes. To figure out how much tax to withhold, you use the employee's Form W-4 that they filled out and gave to you, and you use the methods described an IRS Publication 15, Employer's Tax Guide and Publication 15-A, Employer's Supplemental Tax Guide. So, here's a bit more detail on the kinds of taxes an employer needs to withhold and pay. There's federal income tax, employers generally must withhold federal income tax from employees' wages, there's Social Security and Medicare taxes, employers generally must withhold part of Social Security and Medicare taxes from employees' wages, and then the employer pays a matching amount. Employers use Form 941, which is Employer's Quarterly Federal Tax Return or Form 944, which is Employer's Annual Federal Tax Return used to report federal income tax and Social Security and Medicare tax. And then there's federal unemployment tax which is also known as FUTA tax, F-U-T-A. Employers report and pay FUTA taxes separately from federal income tax and Social Security and Medicare taxes. You pay FUTA tax only from your own funds, from the business owner's funds. Employees do not pay this tax and they don't have it withheld from their pay. To report FUTA, use Form 940, Employers Annual Federal Unemployment Tax Return. But wait, there's more. Employers need to deposit and report employment taxes. Employers use a system called EFTPS to deposit employment taxes. EFTPS stands for Electronic Federal Tax Payment System. Employers file employment tax forms quarterly or annually depending on the type of form. For example, Form 941 is filed quarterly, Form 944 and Form 940 are filed annually. At the end of the year, employers prepare and file Form W-2, Wage and Tax Statement, to report wages, tips, and other compensation paid to an employee. Employers use Form W-3, Transmittal of Wage and Tax Statements to transmit Forms W-2 to the Social Security Administration. That's a lot of information about what a new, a brand-new employer needs to know. So, if you didn't catch all that, you might want to again, go to the Gig Economy Tax Center. You'll find resources there like understanding employment taxes and filing and paying your business taxes. Those resources are also on the resource document that's available on the materials tab. So, with that, Earline, I believe it's time for our second polling question. BROWN: Yes, it is, Karen. Thank you. OK, our second polling question is, If a gig economy platform determines that its workers are employees, it is required to file the following forms. A, Form 1099 Miscellaneous and Forms W-2, B, Form W-2, Form 941, and Form 940. C, Form W-2 and Form 1099 Miscellaneous, or D, Form 1099 Miscellaneous and Form 1099-K. Please take a minute and review the question again, then click in the radio button you believe most closely answers this question We'll give everyone a few seconds to make a selection. OK, we're going to stop the polling now and we'll share the correct answer on the next slide. And the correct answer is B, Form W-2, Form 941, and Form 940. Oh, great, I see 93 percent of you responded correctly. That's a great correct response rate. Sherry, what are the effects of classification on the worker? SAUCERMAN: OK, well, thank you, Earline. That's a good question. Before I get into the effects on the worker, I do want to mention again, for those of you who did not here before, we're aware there is that clicking, tapping noise in the background that's very irritating. We're trying to get it fixed. I noticed it seems to have stopped again, but yes, we're aware of it and we're really trying to get rid of it. And we're very sorry that that's happening. But let's look about, look at business expenses. If you're an employee, you cannot deduct your business expenses. If you're self-employed, you may be able to deduct certain business expenses and a few of those are listed on the slide that you're seeing now. For example, if you're in the rideshare business, you might be able to deduct expenses for supplies, cell phones, auto expenses, food and drinks for passengers, car washes, parking fees, tolls, roadside assistance plans, taxes, and incentives associated with certain electric in the hybrid vehicle. However, you need to be sure and keep good records separating the cost for those items that you use for business and those that are used personally, because generally you cannot deduct personal living or family expenses. It's really important to keep good records. You want to choose a record keeping system that's suited to your business and that clearly shows your income and expenses. The business that you're in is going to affect the types of records that you need to keep for federal tax purposes and your record keeping system should include a summary of all of your business transactions. They need to show your gross income as well as your deductions and your credits. Federal law sets statutes of limitations that can affect how long you need to keep tax records. Now generally, this is three years from the time you filed your return. However, in certain situations, you may be required to keep your business and tax records longer than three years. Now, if you select the link for gig workers on the Gig Economy Tax Center, you'll find links to more information including links to information on record keeping, and you'll also find links to many helpful publications for small businesses. We've also included those links in our resource documents that you can download from the webinar. OK, now let's talk about income, business income. Gig economy income is taxable. You must report the income earned from the gig economy on a tax return, even if it's just a part time, temporary, or side work. Income's taxable even if it's paid in cash, property, or virtual currency. Now, if you're an employee, wages are usually going to be reported on a Form W-2 which is the Wage and Tax Statement. If you're self-employed, you need to be sure and keep track of the business income that you receive. And gig workers might do work through multiple businesses or platforms, and it's very important to keep track of all of your income as you might not receive an information return that includes all of your business income. What I am talking about is information return, I'm talking about things such as the Form 1099-MISC, also called the 1099 Miscellaneous, that's used to report miscellaneous income such as non-employee compensation. Then there's also Form 1099-K which is used to report third party transactions, such as those made through a payment card, like a credit card. Now the businesses that you work with may send forms to the IRS to report payments to you. If they do, you should receive copies of the forms by January 31. And that would be things like the Form 1099-K and the 1099 Miscellaneous and the W-2 that I just talked about. You want to keep your, use your sales receipts to report any payments that were not reported to you on either a Form 1099 or a W-2.

Remember, business income is taxable, even if it is not reported on an information return.

Now, Karen discussed taxation related to employees. Well, the self-employed and independent contract workers are taxed differently than employees. If you're an employee, in addition to income tax, you pay Social Security and Medicare taxes and your employer pays a matching amount of Social Security and Medicare tax. So, on the other hand, as a self-employed person, you pay an amount equal to what an employer pays in addition to what the employee pays, but you are allowed a deduction for half of that tax payment. And this is all worked out on a Schedule SE, Self-Employment Tax, that is attached to your Individual Income Tax Form 1040. But before you determine if you're subject to self-employment tax and income tax, you must subtract your business expenses from your business income. If your expenses are less than your income, the difference is net profit and it becomes part of your income on the Form 1040. If your expenses are more than your income, the difference is a net loss. You may be able to deduct your loss from gross income on the Form 1040, but in some situations, your loss is limited. I recommend Publication 334, Tax Guide for Small Businesses, and that's for individuals who use the Schedule C. That has more information on business income, expenses, and when a loss is deductible.

You'll see a link to that in your resource's documents, that's Publication 334. Now you have to file an income tax return if your net earnings from self-employment are $400 or more. If your net earnings from self-employment are less than $400, you still have to file an income tax return if you meet any other filing requirements listed in the instructions for Form 1040. That's your U.S. Individual Income Tax. And don't forget, if you're self-employed you must pay as you go, not only for your income tax as was discussed before, but also for the self-employment tax, the SE tax. As I said, the U.S. tax system is pay as you go. And this means you should have paid the majority of your tax liability at the time your tax return is due, or you may incur a penalty.

Employees are usually going to satisfy this requirement through their paycheck withholding. If you're involved in the gig economy and you don't have taxes withheld from your income, you might want to make estimated tax payments during the year to cover your tax obligations. Estimated payments are due on April 15, June 15, September 15, and January 15 of the following year. You can use the Form 1040-ES, Estimated Tax for Individuals, to figure and to report the amount of these payments. But the fastest and easiest way to make the estimated tax payments is actually electronically. You can use IRS Direct Pay, or you can use the Treasury Department's Electronic Federal Tax Payment System, also known as EFTPS. Now, you may also want to make estimated tax payments to help avoid penalties if the amount of income tax withholding from your salary, pension, or other income is not enough to cover your taxes for the year, or you can help cover your taxes by filling out and submitting a new Form W-4, Employee's Withholding Allowance Certificate. If you have other jobs where you work as an employee, you'll have them withhold more money to cover your income that doesn't have withholding. A Paycheck Checkup using the IRS Withholding Estimator can help you see if you should make additional payments to avoid the unexpected tax bill or an underpayment penalty when you file your tax return. OK, Earline, I think it's time for our third polling question. BROWN: Yes, Sherry, it is. Audience, we're receiving comments that some of you are not getting the polling questions. Please take time now to disable your pop-up blocker so you can answer the questions. Now, here's our third polling question, if a gig worker is liable for income tax and self-employment tax, what options does the gig worker have to pay those taxes? A,IRS Direct Pay, B, EFTPS, C, Form 1040-ES, D, increase withholding on their wage income using Form W-4, or E, any of the above. Please take a minute, review the question again, then click in the radio button you believe most closely answers the question. We'll give everyone a few seconds to make a selection. OK, we're going to stop the polling now, then we'll share the correct answer on the next slide. And the correct answer is E, any of the above. Let's see how many people got that right. Oh, you're doing a really good job, 92 percent responded correctly. That's great. Now, Karen, what about people who rent out part or all of their home? How does that affect their taxes? BREHMER: OK, that's a good question. Let's talk about that. And I'll just mention again, for people who are commenting, we're aware that there's this clicking noise in the background. We're working to fix it. But in the meantime, we will, we will proceed. So, let's talk about rules for home rentals. If you received rental income for the use of a house or your apartment or your vacation home, you must usually report it on your tax return. You can deduct certain expenses, but special rules and limits often apply. These deductible expenses reduce the amount of rental income subject to tax, and these expenses could include mortgage interest, real estate taxes, casualty losses, maintenance, utilities, insurance and depreciation. If you use the dwelling unit for both rental and personal purposes, you generally must divide your total expenses between the rental use and the personal use, based on the number of days used for each purpose. And you won't be able to deduct your rental expenses in excess of the gross rental income limitation. There's a special rule if you use a dwelling unit as a personal residence and you rent it for fewer than 15 days.

When you rent it for fewer than 15 days, you don't report any of the rental income and you don't deduct any other rental expenses. Normally, rental income and expenses are reported on Form 1040, Schedule E, Supplemental Income and Loss. But if you provide substantial services, and we're talking about hotel-like services in conjunction with the property, then you use Form 1040, Schedule C, Profit or Loss from Business, or a partnership or corporation return if your business is set up that way. Examples of substantial services include maid service, regular cleaning and changing the linens. So please note that substantial services don't include things like just the heat and light that you provide in the rental space or cleaning of public areas or trash collection. So, if you want to know more about this, again, go to IRS.gov or look at the information in the resource document. You'll find tips on rental real estate income, deductions, and record keeping. You'll find Topic 415, Renting Residential and Vacation Property, and Publication 527, Residential Rental Property Including Rental or Vacation Home. Our last topic for today is depreciation. Independent contractors may be able to deduct business expenses, and depreciation is an example of a business expense. So, if you're a gig worker, you might be wondering what is depreciation? Depreciation is an annual income tax deduction that allows you to recover the cost or other basis of certain property over the time you use the property. It's an allowance for the wear and tear, deterioration, or obsolescence of the property. The kinds of property you can depreciate include machinery, equipment, buildings, vehicles, and furniture.

You can't claim depreciation on property held only for personal purposes. If you use property, for example, a car for both business and personal purposes, you can depreciate only the business use of that asset. And as Sherry has mentioned several times, you need to keep records that separate the business use from the personal use. Here's a bit more information about depreciation. You can depreciate property that meets all the following requirements. It must be property you own, it must be used in a business or income producing activity, it must have a determinable useful life, it must be expected to last more than one year, and it must not be excepted property. Excepted property is described in IRS Publication 946, How to Depreciate Property, and that's also on your resource document. Depreciation begins when a taxpayer places property in service for use in a trade or business or for the production of income. The property ceases to be depreciable when the taxpayer has fully recovered the property's cost or other basis, or when the taxpayer retires it from service, whichever happens first. There are a few more other things you need to know about depreciation, and you can learn more about that in Publication 946, How to Depreciate Property. And there are some simplified options, such as the standard mileage rate for business use of a car or the simplified method for claiming the home office deduction. So, if you want to learn more about depreciation and those simplified options, there's some links on IRS.gov. I mentioned earlier Publication 946, How to Depreciate Property, Publication 527, Residential Rental Property. One that we haven't mentioned until now is Publication 463, Travel, Entertainment, Gift, and Car Expenses, and also Publication 551, Basis of Assets. So, with that, Earline, could you help us out by doing the final polling question?

BROWN: Yes, Karen, I can. Our filing, our final polling question is, what is the rule when you rent out your home for fewer than 15 days? A, don't report any of the rental income and don't deduct any expenses, B, report the income and expenses on Form 1065 for Partnerships, C, report the income and expenses, including depreciation, or D, there are no special rules based on the number of days you rent out your home. Please take a minute and review the question again.

Then click in the radio button you believe most closely answers this question. We'll give you a few seconds to get your answer. OK, we're going to stop the polling now and we'll share the correct answer on the next slide. And the correct answer is A, don't report any of the rental income and don't deduct any expenses. Let's see what our response rate is here. Let's see how many people got that answer correct, 88 percent. That's a good response rate. We will move on.

Sherry, before we move on to our question and answer portion of our webinar, can you share some of the resources we have? SAUCERMAN: I'd love to, Earline. You know, there, here are some additional resources for more information on the tax, on taxes in the gig economy. First of all, we've been talking about it, I really want to recommend our Gig Economy Tax Center. Now, you could get there using the URL that's shown on the slide, but I would just go to IRS.gov and use the search term gig economy. Now we also have a new publication, it's Publication 5369, Gig Economy and Your Taxes, is a nice overview of things that you should know if you're part of the gig economy. Now a couple of helpful publications are listed on the next slide. There's Publication 17, Your Federal Income Tax for Individuals, this covers just about everything the individual taxpayer needs to know about completing their federal income tax returns. The Publication 15 series is the resource for businesses with employees, and this includes not only Publication 15 which is the Employer's Tax Guide, but Publication 15-A which is the Employer's Supplemental Tax Guide, it supplements the basic information in Publication 15. Publication 15-B, which is the Employer's Tax Guide to Fringe Benefits, and the new Publication 15-T is Federal Income Tax Withholding Methods. Links to each of these resources and many more that we've been mentioning, such as Publication 334, Tax Guide for Small Businesses, Publication 535, Business Expenses, Publication 583, Staring a Business and Keeping Records all of these we have links to them included on our resource handout for today's session. So, I hope you download that. Back to you, Earline. BROWN: Thanks, Sherry. Hello again, it's Earline Brown, and I'll be moderating the Q&A session. Before we start the Q&A session, I want to thank everyone for attending today's presentation on Understanding the Gig Economy. Sherry and Karen are staying on with us and we'll be answering your questions. Stacey Dressler is joining us for the Q&A session. Stacey is a program manager with Campus Case Selection in our Small Business /Self-Employed Division. Welcome, Stacey. Earlier, I mentioned we want to know what questions you have for our presenters. Here's your opportunity. If you haven't input your questions, there's still time. Go ahead and click on the, Ask Questions, button, type in your question and click, Submit. One more thing before we start, we may not have time to answer all of the questions that have been submitted. However, let me assure you that we will answer as many as time allows. If you're participating to earn a Certificate and related Continuing education credit, you will qualify for one credit by participating for at least 50 minutes from the official start time of the webinar, which means the first few minutes of chatting before the top of the hour does not count towards the 50 minutes. Sorry. OK, Karen, Sherry, and Stacey, I hope you're ready. We received a lot of questions. Let's get started so we can get through as many as possible. Stacey, I'll go ahead and begin with you. One of the questions we received is, Can I take a deduction for the cost of my cell phone? STACEY DRESSLER: Thanks, Earline.

That's a good question. So, I think this comes down to whether or not you're an employee or an independent contractor. So, if you're an employee, you can deduct business expenses. If you're an independent contractor and use your cell phone for business, you may be able to claim the business use of the phone as a business expense. So, remember, if you use your phone for both business and personal purposes, you can only expense the business portion. BROWN: OK, Stacey, we have another question for you. This question is, what can gig workers do to not owe taxes at the end of the year? DRESSLER: OK, I think again, that depends on their classification from the platform. If they're employees they should have appropriate withholding taken from their employer, and they can use the withholding estimator on IRS.gov to help them. Gig workers who are self-employed and don't have any other wage income should make quarterly estimated tax payments as they don't have any withholding from the platform. Also, if their gig work is supplemental income and they have other W-2 employment, they can always increase their withholding to cover the additional gig work. BROWN: Thank you, Stacey. Sherry, I have a question for you. How long does it take the IRS to make a determination of employee versus independent contractor once a W-8 is received? SAUCERMAN: OK, I think what they're asking about is the Form SS-8 which you'll see BROWN: Yes. SAUCERMAN: is a Request for Determination of Worker Status. And if you go to the IRS website and look at, look up independent contractors self-employed, it will tell you this information, that it can take at least six months to get a determination. So that is something to consider if you're going to do that. It's not a quick process. BROWN: Thank you. Karen, I have a question for you. This one says, one of the big issues that I found with clients is the lack of records, specifically with the Uber and Lyft.

They only bring the Uber or Lyft lift statement showing the driving mileage, but not their own daily log. What is the IRS position on this matter? BREHMER: OK, great. That's a good question, Earline. I'm going to answer it in two ways. I think the person asking the question is probably a tax preparer, and then also kind of answer it from the point of view of the, of the gig worker. As a gig worker, as Sherry has mentioned a couple of times, it's really important to keep good records, records of all the income, records of the expenses. One of the resources that Sherry provided to help people who are new to this whole thing of being self-employed or doing gig work, one resource that's helpful is Publication 583, Starting a Business and Keeping Records. The reason I like that publication so much is it gives you some simple ways to keep track of income and keep track of expenses. So, in a perfect world, a taxpayer would keep track of their income expenses from the very time that they start doing the work and then they'd bring those beautiful records to their tax preparer, and it would be easy to do the return when you are the tax preparer looking at those records. As a tax preparer, if you have a client who comes to you and you don't feel that the records they provided you are adequate, you can help them reconstruct those records. You can give them suggestions of how they can figure out exactly what their income and expenses were if they appear to be lacking some of those documents. And then as a tax preparer, you can help your client understand what they should be doing from this point forward so that they do have better records for the next year. The other publication that is helpful in this is Publication 463, which helps you figure out stuff on business miles and standard mileage rate or figuring out if you're going to take depreciation and actual expenses and all that. So again, as a taxpayer, you could use Publication 463 to help learn more about this. As a tax preparer, you could recommend that, both publications to your clients so they can understand this better. I'm going to toss one more thing in there and then I'm going to go back to you, Earline. This whole issue of record keeping and how do I do this and I'm new in business. I want to let everyone know that there are organizations out there that help small business owners understand all this stuff. It's hard for us to cover everything in the time that we have, right? I'm going to mention two organizations. One organization is called SCORE.

Another organization, the acronym is SBDC that stands for Small Business Development Centers.

So, SCORE or SBDCs, those are examples of two organizations that offer workshops for taxpayers or offer one-on-one helping small business owners understand all this tax stuff and other of their business responsibilities or getting a business started. So, search in your area for organizations that offer workshops that help you understand this. Like I said, it's hard for us to do it all in an hour, but there are resources are out there to help you. OK, enough from me.

Earline, I will turn it back to you. BROWN: Great information. Thank you, Karen. Stacey, we have another question for you. My 1099-K, the gig work is higher than the amount I received.

Why is that? DRESSLER: Oh, thanks, Earline. And that's a common question. The 1099-K reports gross amounts. So that includes gross reportable transactions, and that's not necessarily the amount that's being deposited into the taxpayer's bank account. Box 1 would also include items such as merchant fees or refunded amounts, things of that nature. So, when a taxpayer receives 1099-K, they need to understand that that should be considered along with other documents and books and records when they calculate their gross receipts for their income tax return. BROWN: OK, thank you. Let's see. Karen, could you, let's see, could you speak of the home office and when is the new updated Pub 17, when is it going to be released? BREHMER: OK, I'm so happy to see that question about Pub 17. It has been released as of today, or maybe yesterday. So, IRS Publication 17 has been updated for 2019 tax returns. I'm very excited. As far as the question about, whoops, now I lost my train of thought. What, uh oh. Repeat the question, the first part of the question for me Earline. BROWN: OK, home office, I just hit the delete button.

BREHMER: All right. BROWN: The home office BREHMER: I get it. OK. All right, so BROWN: home office. BREHMER: When people, when people are trying to figure out if they can take the deduction for business use of their home, I recommend Publication 587. One of the things you need to figure out first is whether you qualify for the deduction. And that is trying to figure out if you use it exclusively for business, that area of your home, is it exclusively used for business? Another thing you'll read about is, do you use it regularly? And is it for trade or business? Is it your principal place of business or is it a place to meet clients? So, all of that is explained in that publication. Do you qualify for a deduction? And then the next thing you'll read about is how to figure the deduction, and you have these two choices. One is actual expenses and one is the simplified method. So actual expenses means you figure out the percentage of your home that's used for business and you take a percentage of your mortgage interest, a percentage of real estate taxes, a percentage of utilities. The simplified method is where you just figure out the square footage of your home that meets the rules for being able to take the deduction and you multiply that by $5. So, there's these two methods to figure out the deduction or take it, each one maybe has pros and cons. And you can learn more about that in the publication and also, it's explained on the IRS website in various places. You can read about it there, too. The other, I'm big on the resources, as you can see. I just want to mention, too, we have another resource available to small business owners who are new to all of this. It's a workshop, it's online, it's free, available 24/7, it's on the IRS website. And if you went to IRS.gov and you just put virtual workshop in the search box, you'd find this workshop I'm talking about. It's called Small Business Taxes, A Virtual Workshop. If you didn't get that title, it's OK. Enter virtual workshop and a lot of these things we're talking about today and a lot of the questions you have, you can look at that workshop and view it at your leisure, and sort of absorb it in a more, you know, a slow manner. It's hard to catch all of it, like I said today. OK. Thank you, Earline. BROWN: Thank you. Thank you very much. OK, let's see.

Stacey, what information return is typically associated with a gig work? DRESSLER: OK, so, so again, it depends how the gig worker is being classified. If they're classified as an employee, they're going to get a W-2. If classified as an independent contractor, they could get a 1099 Miscellaneous or perhaps a 1099-K. And you know, remember from earlier there are different recording thresholds for these forms. So, not all individuals who perform work in the gig economy will receive an information return for that work. In some instances, also, some of these folks might receive a 1099-K, representing gig work that they've done for the platform.

And then also a 1099-MISC which would represent income earned by the platform for promotions or referrals, things along those lines. So, every situation is going to differ. But either way, the gig work is going to be taxable whether or not an information return is received. BROWN: OK, good. Thank you. Thank you, Stacey. Sherry, I have a question for you. Someone says, it is my understanding that the tax estimator does not work if you only have 1099 income. Is that still correct? SAUCERMAN: Thanks, Earline. Yes, that is correct. It is the Tax Withholding Estimator, and so you do need to be getting some kind of income that has, that's subject to withholding, wages or a pension. But if you do have either, maybe you're filing a joint return and one of the spouses is receiving wages and the other has self-employment income, you will be able to use it. It will, because what it's going to tell you is how to adjust your withholding. How you can change withholding, the income where you do have withholding what you can put on that W-4 to get more income, to get the proper amount of income on there. But it will, if you have some withholding wages and you have some self-employment income, it will figure out what the self-employment tax would be on that net income and it would deduct out the half of the self- employment tax. So, it's been improved. It's pretty nice, but you do have to have something that's got withholding. BROWN: Good, thank you. Thank you, Sherry. Let's see, Karen, how do you report Airbnb income? BREHMER: Airbnb income would be an example of rental income. Now remember, if it's fewer than 15 days, then you don't report the income and you don't report the expenses. But if it's more than 15 days, then that's just an example, Airbnb is an example of a gig platform. They're the company that's made it easier for you to find people who want to rent your home. And as the owner of that home or apartment or vacation home, then you would be reporting that Airbnb income and reporting the expenses that you can deduct. I think I will leave it at that. Airbnb income is a perfect example of gig economy income that needs to be included on your tax return. There's income to report and expenses you get to deduct. BROWN: Thank you, Karen. Stacey, I have a question for you. As a point of clarification, is the 1099-K in lieu of the 1099 Miscellaneous? DRESSLER: Thanks. So, there're two different forms that report different items. The miscellaneous is required when a payer makes payments in the course of business over $600. The 1099-K has two purposes, it reports the payment card transactions or what we know as credit card transactions, or it reports the settlement of third-party payment network transactions. And that, you know, is typical with gig work, right? So, gig work is connecting a platform with a client, and they're ultimately settling their payment. So that's why the 1099-K is, you know, often used for payments of gig work. So, there are two separate forms for two separate purposes. And of course, they have different thresholds for reporting requirements. BROWN: OK, thank you. Karen, I have another question for you. Is doing volunteer work with no pay considered a gig work and can you use Schedule C to deduct expenses? BREHMER: OK, that is a good question. So, with volunteer work you're not getting paid, so it's not gig work because it's not paid, it's volunteer. And as a volunteer, you wouldn't use Schedule C to deduct expenses. When you're a volunteer, for the most part, you're not deducting expenses at all. You're doing it out of the goodness of your heart. One exception to what I just said is if you are a volunteer and you drive, you have volunteer miles that you're driving for an organization, then you can take a deduction of 14 cents per mile. There's more, and let's see, I'm trying to think of a best place to get more information on that. I guess I'd go to IRS.gov and just put volunteer work in the search box.

But my main point is that the whole point of being a volunteer is you're not getting paid income.

You're also not deducting expenses. The exception, again, is that cents per mile for miles you drive. BROWN: Thank you, Karen. Sherry, I have a question for you. Someone wants to know, what did you say about $400? SAUCERMAN: OK, yes. I was, when I was talking about the $400, that was when you need to file an income tax return. So, if you are, if your income from self-employment is $400 or more then that's going to cause you to have to file an income tax return. Now, if the net earnings from self-employment is less than $400 and you have other income, you may still have to file an income tax return if that other income causes you to meet the other filing requirements. And those are listed in the instructions to the Form 1040, the Individual Income Tax Return, and also in the Publication 17 that we were talking about earlier.

BROWN: OK, thank you. Stacey, can I deduct mileage when I'm a gig worker? DRESSLER: Thanks, Earline. Again, I know I've said this a few times, but it depends on how the platform company is treating you. If you're an employee, you can't deduct business expenses. But if you're an independent contractor and considered self-employed, obviously, you can deduct business expenses, assuming they're both ordinary and necessary. So, an example for mileage, I think, that comes to mind are ride-share drivers or folks that are doing the delivery services. And obviously mileage could be deductible there. Gig workers need to make sure that they keep good records, right? So, they can break out for business or for personal use. The good news is a lot of these platform entities, these companies that gig workers do work for, they're known to give out pretty detailed statements. And in most cases, they'll give, you know, drivers a breakdown of mileage that's been accrued during the gig work. So that's very helpful for tax purposes.

BROWN: OK, and Stacey, for clarification, someone has asked, Is the new 1099 Miscellaneous, has it changed his name? DRESSLER: Oh, that is a good question, and thanks for asking that. For payments that are made in 2020, the miscellaneous income that's currently in Box 7 of the 1099 Miscellaneous is being broken out, and there will be a new 1099-NEC for Nonemployee Compensation. So that's not until next reporting year. The filing requirements or the thresholds have not changed, but just Box 7 for NEC is going to be broken out of the 1099 Miscellaneous that currently exists and it will be a separate form that the payers will use.

BROWN: OK, thank you. Sherry, can an individual who is self-employed sign up to use EFTPS?

SAUCERMAN: Absolutely. EFTPS can be used to pay just about any kind of taxes. You will have to have an account for paying under your Social Security number, and if you're using it for business purposes as well, you would have a different one on your business EIN. But yes, you can use it to pay your estimated taxes, if you have an installment agreement you can pay that through EFTPS as well. Just be sure you pick the right items from the drop-down menu. BROWN: OK, good.

And Sherry, while I have you, someone would like to know where the gig economy website is again?

SAUCERMAN: Oh, sure. The easiest way to get to it is just go to IRS.gov and do a search under, search gig economy and you'll get the link to the Gig Economy Tax Center. Or you can click on the link in the resource document. Or if you'd like the URL it's www.irs.gov/business/gig-economy-tax-center. Like I said, search gig economy. BROWN: Thank you.

Let's see. Karen, here's one. Do I have to have a Schedule C for each gig self- employment?

BREHMER: No. If you are doing several kinds of gig work, you are, let's see, delivering food for Door-Dash and you also are, you know, provide rides to people. You'd want to keep records of both, records of income, records of expenses. If your business is set up as a sole proprietor, sole proprietors use Schedule C and you would put all of that income on one Schedule C. Even as I'm saying that, I guess there's no harm in putting it on two Schedule Cs if that helps you, helps you to kind of figure out the income from each and the expenses from each, but you wouldn't have to put it on two. I'm going to stick in one more question and answer here that I just saw. And someone is saying they've been a preparer for a long time, and they know the employee versus self-employed. This person just wants to understand what a gig economy worker is. Is self-employed basically being renamed to gig, and I guess I'd say yes, sort of. Gig economy, gig worker, sharing economy, shared work, is a new term but it's not, but it's as a tax preparer, you know, anybody doing work on the side, doing something in addition to their wage job, starting a new business, it's self-employment income, or they may have set up this business as a partnership or as a corporation. So, gig work, gig economy, it is kind of a new term in the last five years, maybe. But it would often be self-employment income, self-employment expenses. And as I said, it may be the business owner may have set up another kind of entity. I hope that answers your question. And I'll turn it back to you, Earline.

BROWN: Thank you. Thank you very much. Now, that's all the time we have for questions. And I want to thank Karen and Sherry for sharing their knowledge and expertise in answering questions, and Stacey for joining us and answering your questions as well. Before we close the Q&A session, Karen and Sherry, what are the key points you want the attendees to remember from today's webinar? Sherry, let's start with you. SAUCERMAN: OK, thanks, Earline. First of all, remember, income earned through a gig economy is taxable. And how you report that income is going to depend on whether you're considered an employee or self-employed. Whether you treat it as an employee is not just a matter of choice, it comes down to control. So, for more information on that I recommend that Publication 1779, Employee or Independent Contractor, and there is a link to that in the resource document. Also, whether you're treated as an employee or independent contractor, you still need to keep good records and you're going to need those records to complete tax return. And finally, don't forget about our Gig Economy Tax Center for all the resources that you need. BROWN: Thanks, Sherry. And Karen, what are your most important points? BREHMER: So, Sherry just mentioned that when you're a gig worker, it's important to determine if you are an employee or self-employed. And the same is true if you operate a platform for gig economy workers, it's important to determine if your workers are independent contractors or employees. You can use the resources we've shared with you today on IRS.gov or you can submit a Form SS-8 to the IRS. The gig workers can submit the SS-8 or the gig economy platform can submit that form. If you rent your home or your apartment or your vacation home, there are rules for how you report the income and the expenses. And lastly, you need to learn about depreciation for home rentals and business use of assets like using your car for gig work.

And with that, I will turn it back to you, Earline. BROWN: Thanks, Karen. Audience, we're planning additional webinars throughout the year. To register for an upcoming webinar, please visit IRS.gov, keyword search webinars, and select the Webinar for Tax Practitioners or Webinars for Small Businesses. We will be offering certificates and CE credit for other upcoming webinars as well. You can visit the IRS Video Portal at www.IRSvideos.gov. That's www.IRSvideos.gov. We want to remind you, continuing education credits or Certificates of Completion are not offered if you view an archived version of any of our webinars on the IRS Video Portal. Again, a big thank you to Karen and Sherry for a great webinar, and Stacey for answering your questions. I also want to thank you, our attendees, for attending today's webinar on, Understanding the Gig Economy. If you attended today's webinar for at least 50 minutes after the official start time, you will receive a certificate of completion that you can use with your credentialing organization for one possible CPE credit. If you're eligible for continuing education from the IRS and registered with your valid PTIN, your credit will be posted in your PTIN account. For those of you eligible for continuing education from the California Tax Education Council, your credit will be posted to your CTEC account. Also, if you're registered through the Florida Institute of CPAs, your participation information will be provided directly to them. If you qualify and have not received your certificate and or credit by March 12th, please email us at CL.SL.Web.Conference.Team@IRS.gov. The email address is shown on the bottom of this slide. If you're interested in finding out who your local Stakeholder Liaison is, you may send us an email using the address shown on this slide and we'll send you that information.

We would appreciate it if you would take a few minutes to complete a short evaluation before you exit. If you'd like to hear more sessions like this one, let us know. If you have thoughts on how we can make them better, please let us know that as well. If you have any requests for future webinar topics or pertinent information you'd like to see in an IRS Fact Sheet, a Tax Tip or FAQ on IRS.gov, then please include your suggestion in the comments section of the survey.

Click the survey button on the left side of your screen to begin. If it doesn't come up, check to make sure that you have disabled your pop-up blocker. It has been a pleasure to be here with you, and on behalf of the Internal Revenue Service and our presenters, we would like to thank you for attending today's webinar. It's important for the IRS to stay connected with the tax professional community, industry associations, federal, state, and local government organizations, and individual tax payers. You make our job a lot easier by sharing the information that allows the proper tax reporting. Thanks again for your time and attendance, and we wish you much success in your business or practice. You may exit the webinar at this time.