Tax issues

Taxation in the shared economy came to Congress' attention earlier this year when National Taxpayer Advocate Nina Olson told lawmakers that many service providers were unaware of their tax obligations. According to Olson, more than 40 percent of service providers in the sharing economy were unaware of possible estimated tax requirements. Many service providers had failed to set aside funds to pay their tax obligations, Olson added.

Olson urged the IRS to expand its presence in the sharing economy, including the creation of a dedicated web page, online tools such as a mileage log app and an estimated tax payment calculator, to assist taxpayers in the sharing economy and improve compliance with the tax laws. The IRS responded in August with a dedicated webpage for the sharing economy.

New web resources

The new online Sharing Economy Resource Center contains links to more information about income taxation and withholding, filing requirements, estimated tax payments, rental income, and more, including depreciation, business expenses, and employment taxes.

The IRS reminded taxpayers that income received is generally taxable, even if the recipient does not receive a Form 1099, W-2 or some other income statement. This is true if the sharing economy activity is only part-time or a sideline business and even if the recipient is paid in cash, the IRS highlighted on its webpage.

Special rules generally apply to the rental of a home, apartment or other dwelling unit that is used by the taxpayer as a residence, the IRS explained. Generally, rental income must be reported in full, any expenses need to be divided between personal and business purposes and special deduction limits apply. However, special rules apply if the dwelling unit is rented out fewer than 15 days during the year.

If you have any questions about the sharing economy and federal tax rules, please contact our office.