Uber, Lyft, Airbnb, Etsy, Rover, TaskRabbit. In case you have used some of these services–or provided services for them to others–you’re a member of the sharing economy.
If you have only used these types of services (and never provided them), as there are you don’t need to concern yourself with the tax implications however, if you’ve rented out an additional room within your house via a company like Uber or Airbnb you are probably collecting a fee–a portion of which matches to the provider (on this example, Airbnb) and a portion that you keep for supplying the service. But whether it is your full-time gig or perhaps a part-time job to make additional cash, you need to be conscious of the tax consequences.
Millennials will be the number 1 people that use sharing economy but Gen X and Boomers utilize it too; plus a recent PWC study found that 24 percent of boomers, age 55 and older, are also providers. Although folks are trying to earn a bit of more income, some dive into it full-time hoping they can earn an income, and still, others simply enjoy meeting new people or providing something that helps people. What most people don’t realize is that this supplemental income could impact their taxable income–especially when they have a full-time job with an employer.
In other words, that extra income might become a tax liability once you determine your tax bill. To prevent surprises at tax time, it’s more important than ever before to be proactive understand the tax implications of one’s new sharing economy gig and speak with a reliable tax professional.
Tip: When you have work within a company ensure that your withholding reflects any extra income based on your side gig (e.g. boarding pets at your house through Rover or driving to get a ride-share company like Uber on weekends). Use Form W-4, Employee’s Withholding Allowance Certificate, to produce any adjustments and send it in in your employer who will put it to use to find the amount of federal taxes to become withheld from pay.
New company Owner
When you might not necessarily consider yourself as a newly self-employed business owner, the government does. So, even when you process a company like Airbnb or Rover, you are considered an entrepreneur and are in charge of your personal taxes (including paying estimated taxes if you wish to). The choice is yours to keep track of income and expenses–and of course, to keep good records that substantiate your revenue and expenses (more about this below).
Note:Should you receive income from your sharing economy activity, it’s generally taxable even if you don’t be given a Form 1099-MISC, Miscellaneous Income, Form 1099-K, Payment Card and Third Party Network Transactions, Form W-2, Wage and Tax Statement, as well as other income statement.
And today, for the good news. As a business owner, you might be eligible for certain deductions (susceptible to special rules and limits) that you cannot take being an employee. Financial planner Schaumburg reduce the amount of rental income that’s at the mercy of tax. You might also have the ability to deduct expenses directly related to enhancements made exclusively for your invited guests. As an example, if you rent out a space in your apartment through Airbnb, amounts you may spend on window treatments, linens, or even a bed, could possibly be deductible.
For additional information about QuickBooks Consultant Illinois web portal: this.