As the number of gig workers grow, experts say the tax code is outdated
When Ben Begas first started working for Uber Eats, he thought it was an easy way to make an extra buck. He did not realize paying taxes on that income would not be so cut and dry.
“First, I thought I made so little that either I didn’t owe anything, or the IRS wouldn’t care,” said Begas.
Begas is part of the growing population of Americans picking up temporary, flexible jobs, better known as gig work, through app-based companies like Uber, Airbnb or Wag. But experts say the tax code is still behind the times.
“Our tax system was not designed for gig workers, our tax system was designed for traditional employees,” said Aspen Institute Future of Work Initiative Al Fitzpayne.
Unless someone working for a digital platform company makes over $20,000 and has more than 200 transactions a year, the gig worker does not need to be sent a tax form nor does the company processing the worker’s income need to report it to the IRS.
As a result, many gig workers do not report this income or even correctly pay taxes on it, according to several experts from the Tax Policy Center.
And when it comes to the extra money owed by gig workers, the government is not completely in the dark. A Treasury Department Inspector General report published in February found $2.7 billion in potentially underreported tax payments by gig workers between 2012 and 2015.
Some gig economy companies like Airbnb said it has tried to help people better understand their tax obligations.
“We put forth not only resources and educational material ls on our platform, but we also partner with different tax preparation services like Stride, Turbo Tax and H&R Block to help with the filing and compliance for them.”,” Pooja Kondabolu, senior tax policy manager at Airbnb.
Kondabolu also said the company supports the proposed New Gig Act, which was reintroduced by Sen. John Thune (R-SD) last month. One of the key pieces of the legislation is lowering the threshold for reporting workers’ income to the IRS.
“For vast majority of our hosts who don’t meet that reporting threshold, they still legally should report their income. So, if we have one kind of straight forward rule that applies across the industry, at least these hosts know, okay this is what we have to do,” said Kondabolu.
The bill would also address how gig workers are classified in the tax code.
“There are lots of types of professions in what we call the gig economy that sort of fall into that gray area, and we think it’s important to provide clarity for tax purposes. So that when people are filing their tax returns, they know what they’re doing and they’re not making mistakes and they don’t have the IRS coming after them,” said Sen. Thune.