The rise in gig economy and side hustle work means a lot more Americans must keep up with earnings and income tax obligations on their own, without the help of employer payroll systems. The IRS is aware of this, and sent out a reminder this week about the obligation to report all gig economy, service industry, digital and foreign income.
In a March 1 posting on its website, the IRS noted that income earned from the gig economy is taxable and must be reported on tax returns. This includes income earned from on-demand work, services or goods — such as selling products online — driving a car for deliveries or renting out property.
You are obligated to report any income from gig economy and other work, including the following:
Part-time, temporary or side work.
Paid in any form, including cash, property, goods or digital assets
Not reported on an information return form such as a 1099-K, 1099-MISC, W-2 or other income statement.
The IRS also sent out a reminder to Americans who work in restaurants, salons, hotels and other places where tips are provided. Tips usually represent taxable income, and can come in the form of both cash and noncash payments. Cash tips should be reported to employers as well as on tax returns. Noncash tips might include tickets, passes or other goods or commodities provided by customers gives the employee. Noncash tips aren’t reported to the employer but must be reported on a tax return.
Any tips not reported to employers must be reported separately on Form 4137 to include as additional wages with your tax return. You must also pay the employee share of Social Security and Medicare tax owed on those tips.
The IRS also included information on reporting digital assets and foreign income. For digital assets, you’ll see a question at the top of Forms 1040 and 1040-SR that asks about digital asset transactions. All taxpayers filing these forms must check either “yes” or “no.”
If you disposed of any digital asset that was held as a capital asset through a sale, exchange or transfer, check “Yes” and use Form 8949 to figure your capital gain or loss. You will then report it on either Schedule D (Form 1040), Capital Gains and Losses; or, in the case of a gift, Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.
In terms of foreign income, the IRS stated that a U.S. citizen or resident alien’s worldwide income is “generally subject to U.S. income tax,” regardless of where you live. You’re also subject to the same income tax filing requirements that apply to U.S. citizens or resident aliens living in the United States. This includes not just earned income from a job, but also unearned income such as interest, dividends and pensions from sources outside the United States unless they are exempt by law or a tax treaty. You can find more information on foreign income and taxes by visiting the IRS’s Tax Time Guide.
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This article originally appeared on GOBankingRates.com: IRS Reminds Gig Economy Workers Which Income Must Be Reported on 2022 Taxes