IRS Issues Tax Compliance Reminder for Gig Economy WorkersNews, Offshore Account Update
Posted in on January 21, 2022
Whether as a secondary source of income or as a result of being laid off during the COVID-19 pandemic, many people turned to the gig economy last year. If you earned gig income in 2021, the Internal Revenue Service (IRS) wants you to know that it expects you to pay what you owe in 2022. Maryland tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains.
Gig Work is Subject to Federal (and State) Income Tax
The IRS taxes income from all sources. This includes income from gig work. As the IRS explains in a January 2022 Tax Tip:
“Whether it's a full-time job or just a side hustle, taxpayers must report gig economy earnings on their tax return. . . . Earnings from gig economy work [are] taxable, regardless of whether an individual receives information returns.”
So, whether you did some consulting, coaching or training; you provided rides, made deliveries or rented out your home; or you sold any other goods or services on your own in 2021, you must report your income to the IRS (and the Maryland Comptroller’s Office), and you must pay the taxes you owe. If you don’t, you could be at risk for an IRS audit or criminal tax fraud investigation, and you could face liability for back taxes, interest and penalties.
What If You Didn’t Make Quarterly Estimated Tax Payments in 2021?
When you earn income on your own, you don’t have an employer to withhold and remit your estimated tax liability. As a result, you need to pay your estimated tax liability on your own throughout the year. This is done using IRS Form 1040-ES.
If you didn’t make quarterly estimated tax payments in 2021, you will need to take this into account when preparing your annual return in 2022. You may be liable for interest and penalties already; and, if you don’t pay these with your annual return, additional interest and penalties will continue to accrue.
What If You Didn’t Report Your Gig Income in 2021?
What if you earned gig income in 2020 and failed to report it in 2021? If you are behind on your federal income taxes, you should consult with a Maryland tax attorney about your options. You cannot simply add your 2020 gig income into the income you report for 2021. This is called a “quiet disclosure,” and it is against the law. Filing an amended return may be an option; or, you may need to consider making a voluntary disclosure. If you cannot pay what you owe, submitting an offer in compromise may be an option as well.
Request an Appointment with Maryland Tax Attorney Kevin E. Thorn
Do you have questions or concerns about what you owe the IRS related to your gig work? If so, we can help. To request an appointment with Maryland tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, call 240-235-5096, email email@example.com or send us a message online today.Share This Post