In 2020, did you earn income as a gig worker or renting out property through Airbnb or other rental property websites? Are you aware that this income is subject to tax?
Even if not taxed as an employee, even if you don’t receive a W2 or a 1099-Misc or 1099-NEC, you are required to report this income on your income tax return. And you’re subject to income tax, social security and Medicare, and your state may also have income taxes and other local taxes that you may need to pay as well.
But remember, if you are being taxed as a freelance worker with a schedule C on your income tax return, you may be able to write off expenses related to the income that you generate so that you can offset your income by these expenses.
If you need to make these payments, you can do it in two ways.
If you currently have a job with an employer, you can change your withholding so that more tax is withheld on that paycheck that will help cover the tax due on the gig work that you are doing.
You can also make estimated tax payments. This will allow you to prepay the tax before the tax return is due, therefore avoiding the penalty and interest that could occur for not paying your tax timely.
As a reminder, if you have to make estimated tax payments, these are generally due unless the due dates fall on a weekend or a holiday on January 15th, April 15th, June 15th, and September 15th.
If you have questions on how you need to report this information, be sure to talk with your tax preparer as they will help you do the schedule C and any other documentation that would be needed. And if you need help with any of your bookkeeping, feel free to reach out to us www.abandp.com, (310) 534-5577, or [email protected].
