Filing your taxes as a gig worker can seem challenging – save these documents to make filing as self-employed easier.
In 2021, at least 59 million Americans participated in the gig economy. Rather than working for one company long-term, gig workers make a living via contract work from individual clients or by picking up short-term work through companies like UpWork and GoPuff.
There are many skills that can support gig work or self-employment, such as driving for a company like Uber or Lyft, or for delivery services like Instacart or DoorDash. Personal trainers, photographers, makeup artists, landscapers, and many more can also participate in gig work.
These jobs are often temporary, and they offer more flexibility than a traditional job. While some people may work gigs full-time, many gig workers do it as a side job or just occasionally to earn extra cash.
No matter how often you work your gig, you’ll have to report self-employed income of more than $400. Since you won’t receive a W-2 or other tax documents from your employer, it’s important you keep track of your business expenses and income.
Many self-employed individuals pay taxes quarterly. However, the amount you pay is just an estimate of what your taxes will add up to next tax season. The form 1040-ES helps self-employed people and gig workers estimate how much they need to pay each quarter.
It’s important to keep accurate records of your income and expenses so your estimate is as accurate as possible. If you haven’t paid enough in quarterly taxes by tax day, you may be penalized.
Besides keeping proof of self-employed income, such as through 1099 forms, there are many additional documents you may want to hold onto as proof of business expenses. This will help you get the highest tax break possible, make accurate estimated payments, and make filing your taxes quicker and easier when the time comes.
Vehicle & Mileage
There are two ways to deduct your vehicle mileage if you use your personal car for your gig. The IRS provides a standard mileage rate that you can follow, or you can calculate your expenses manually. If you choose this route, be sure to keep your fuel receipts, car insurance bills, and maintenance invoices, such as for oil changes, new tires, or other driving-related repairs. Don’t forget to also keep record of the purpose of your business trips.
For work trips too long for your car, you can deduct travel fares like bus, plane, and train tickets. You can also deduct lodging, meals, and baggage charges, along with other miscellaneous travel expenses like mobile internet services.
If you use your home as an office, save your mortgage bills, home insurance, repair bills, and other home-related expenses. You can make a deduction based on the square footage used as your office. This only applies to home spaces strictly used for business, like an art studio or dedicated office space – the living room couch doesn’t count.
Hardware & Software
If you’ve purchased new hardware or electronics for your business, you can deduct those. These purchases could be a computer monitor, business phone, or digital camera. If you have an Adobe Photoshop subscription for your photography business or a CRM to manage your sales pipeline, you can deduct your subscriptions as well.
Phone & Internet
If you use your phone and internet for your gig, save your monthly bills – you can deduct a portion of them on your taxes.
Education & Finances
Do you attend classes or workshops to better your business skills? Save your proof of enrollment and payment to deduct those on your taxes. If you have a business loan, save your statements because you can deduct the interest on your taxes.
Don’t overpay on taxes, but make sure you avoid a penalty by keeping organized records of your business documents. Having a file folder dedicated to just business-related documents is helpful.
Remember that it’s your responsibility as a taxpayer to provide proof of expenses should the IRS ask for it. If you’re deducting something as a business expense, the IRS must consider it “ordinary and necessary” in order to be eligible as a deduction. If your business expenses seem high compared to your income, the IRS may be inclined to audit you, so it’s best to have documentation for everything you file on your taxes; you may be penalized if you don’t have sufficient proof.
Providers and products are mentioned for educational purposes only. This in no way constitutes an endorsement or approval by A+FCU. Refer to the external organization’s site for the most up-to-date information as their products and terms are subject to change.
This is not intended as tax advice. We recommend talking with a CPA or tax advisor/specialist for more specific information and recommendations.