According to the latest and most reliable Statista stats, there are now as many as 57 million gig workers in the US economy, accounting for 36% of all US workers. Taxpayers that earn income from part time, temporary or side work that isn’t reported on an information return form, (such as 1099-K, W-2, or 1099-NEC) or are paid in cash, property, goods, or virtual currency are considered to be gig workers. Tax returns must be filed if net earnings from self-employment by freelancers or gig workers exceed $400 . Quarterly estimated taxes may be made via the IRS pay-as-you-go tax system to help avoid late payment penalties. The gig economy is an essential part of the U.S. economy and is here to stay. Some estimates project that by 2027, one half of U.S. workers will be involved in the freelance or gig economy. For more information on the gig economy, visit the Gig Economy Tax Center.
Starting in tax year 2022, there is a question at the top of Form 1040 and Form 1040-SR that asks about virtual currency transactions. All taxpayers must check the box indicating either “yes” or “no.” A virtual currency transaction includes, but is not limited to:
- The receipt of virtual currency as payment for goods or services provided.
- The receipt or transfer of virtual currency for free (without providing any consideration) that does not qualify as a bona fide gift.
- The receipt of new virtual currency as a result of mining and staking activities.
- The receipt of virtual currency as a result of a hard fork.
- An exchange of virtual currency for property, goods, or services.
- An exchange/trade of virtual currency for another virtual currency.
- A sale of virtual currency; and
- Any other disposition of a financial interest in virtual currency.
If an individual disposed of any virtual currency that was held as a capital asset through a sale, exchange, or transfer, they should check “Yes” and use Form 8949 to figure their capital gain or loss and report it on Schedule D (Form 1040). If they received any virtual currency as compensation for services or disposed of any virtual currency they held for sale to customers in a trade or business, they must report the income as they would report other income of the same type (for example, W-2 wages on Form 1040 or 1040-SR, line 1, or inventory or services from Schedule C on Schedule 1). More information on virtual currency can be found in Instruction for Form 1040 and on IRS.gov.”
The IRS also reminds taxpayers that U.S. citizens and resident aliens must report unearned income, such as interest, dividends, pensions, as well as earned wages and tips from sources outside the United States unless exempt by law or a tax treaty. An income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the Foreign Earned Income Exclusion or the Foreign Tax Credit, which substantially reduce or eliminate U.S. tax liability. These tax benefits are only available if an eligible taxpayer files a U.S. income tax return.
IR-2022-45 highlights Tax Time Guide, an IRS resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17.
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