Gig, On Demand, Barter and Sharing Economies Must Share with the IRS

Your gig schedule could soon become a complicated “IRS Schedule GIG.” The IRS, it seems, is eager to help business owners. In mid-2016 the IRS opened their Sharing Economy Resource Center, but recently changed the title to Sharing Economy Tax Center, and offer friendly tips and on-line apps and services.

Why get your CPA involved in your gig?

You need your CPA because the IRS has more manpower in their tax and marketing departments than you have. Also, historically the IRS has found that CPAs file client tax returns that are difficult and unprofitable to audit, whereas DIY tax filers are rather easy marks

As to this specific issue of the gig and sharing economy businesses, the IRS has become creative. Their Sharing Economy Tax Center uses soft phrases such as “emerging area of activity”, “encourages taxpayers” and “software programs can help.” This IRS tactic appears to lull emerging business owners into complacency rather than offer sound business advice. Some entrepreneurs have bought into IRS hype that “there’s an app for that.” Others are confident Turbo Tax will do the trick.

With small business owners embracing their newfound feeling of empowerment, the IRS patiently waits to audit DIY tax returns. Untangling the tax-grabbing consequences of “gigging around” in this new sharing economy is not as simple as the IRS leads business owners to believe.

Rebuilding the stage for the on demand gig.

TaskRabbit CEO Stacy Brown-Philpot recently discussed entrepreneur concerns that the unstable nature of working in the “gig economy” offered sharing economy business owners nothing more than an unreliable and unsustainable future. However, TaskRabbit’s well-lighted stage introduced and spotlighted their participating sharing economy business owners to a voracious worldwide audience of consumers. These ambitious giggers who hitched their wagon to TaskRabbit’s star quickly saw their earnings rise from below minimum wage up into the next higher tax bracket. That’s when the IRS leaned in for a closer look.

Guitars definitely not required.

There was a time when gigs followed the rodeo circuit, on demand referred to custom versus in-stock, bartering was trading things, and sharing was what parents told their kids to do. Today these terms have tangled to describe a web-rich economy based on providing immediate gratification to consumers with an ever-increasing desire to have their lives made easier.

Entrepreneurs with bright ideas partner with collaborative platforms such as TaskRabbit, Uber and FancyHands and other online markets as familiar as eBay and Etsy. This togetherness throws the hometown gigger, the on demand provider, and any emerging sharing economy business into the once shadow zones of nexus and taxation. The IRS has zeroed in and set taxing standards that keep even the most seasoned tax specialists scrambling.

Giggers struggle to understand new tax rules and laws and to avoid or get around them when running their business. They are heavily outmatched on many counts, including the IRS’s burdening rule that tax filers are “guilty until proven innocent.” The IRS and every other federal, state and local government agency understand very well how to rake in their part of the lucrative sharing economy business.

Gigging your way after working all day.

Recent polls reveal that one office worker in three has a second job. Thirty-five percent of the US workforce choose freelancing, and as many as 81% of traditional workers surveyed are willing to take a part-time job to make more money. New methods and forms of gigging will especially affect Millennials who have little faith in the traditional job market. They may, if not careful, find themselves promoting a self-fulfilling prophecy of doom if they allow themselves to continue as the poster child consumer as well as the entrepreneur in this gigging, on-demand, sharing economy.

Now what?

The IRS is taking the new economy serious.  Wikipedia and the financial world haven’t even settled on specific terminology yet, but the IRS would be on target calling it a golden egg. No surprise that the IRS is doing it their way as they continue “…providing additional information to help people…”  Don’t count on the IRS fox to quit grabbing eggs from the henhouse. You can bet he’s smart enough to keep the hens working.

If you’re a new business owner, or if you think you may be in a situation to attract unexpected attention from the IRS, let’s get together soon. Call us. 479-478-6831 or email me Melanie@radcliffcpa.com

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