The Sharing Economy and Taxes
Loving the convenience of the shared economy, and the opportunities it is creating for income? The experts from Optima Tax Relief review how the sharing economy can impact your taxes
The sharing economy is one of the fastest growing business trends in history – and has been fueled by more than $23 billion dollars in venture capital funding since 2010 saw the first surge in startups focused on bringing the benefits of a shared economy to the masses. Over the course of the last decade, the principles of a shared economy have come to fruition and many Americans have embraced this new way of life wholeheartedly. But there are tax implications associated with participating in the shared economy. The experts at Optima Tax Relief review the guidelines the IRS has created to help taxpayers understand these tax implications.
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By definition, a shared economy is one in which technology is used to facilitate the exchange of goods or services between two or more parties. While that may sound abstract to many, people across the country are relying on a shared economy each and every day. From Airbnb to Uber to peer-to peer-payment payment apps like PayPal, Square and Venmo, millions of Americans are enjoying the convenience and immediacy that the shared economy provides. In 2016 alone, an estimated 44.8 million Americans took part in the sharing economy, and these numbers are expected to grow to 86.5 million U.S. users by 2021.
This shared economy brings specific tax considerations; all who participate in it should be aware of these tax requirements, especially if you are using these apps to generate revenue. The IRS has created a resource, Sharing Economy Tax Center on IRS.gov to help guide taxpayers through the requirements.
Taxpayers need to be aware that their activity in various shared economy transactions is indeed taxable, whether you are an Uber driver or using PayPal to offer your customers an easy payment method – even if you only do these jobs part time. If you are using any of the shared economy avenues to generate any income, you should receive an information return from the IRS, such as a Form 1099 or a Form W2. Additionally, taxpayers may need to pay taxes on this income on a quarterly basis.
The good news is that much like your regular taxes, certain expenses can be used as a deduction. Driving for Uber on the weekends? Any taxpayer that uses their car for such a purpose is eligible to claim the standard mileage rate deductions. For more information about deductions, please visit the Sharing Economy Tax Center on the IRS website.
Author: James Daniel
