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The sharing economy and employment taxes, part 1: ride sharing

The rapid increase in consumer transactions delivered through social-sharing services has many far-reaching implications. Ride-sharing services such as Uber and Lyft, for example, have begun to upend the business model for the taxi industry in Boston and other cities around the country.

In Greater Boston alone, at least 10,000 drivers have joined Uber since it entered the market here in 2011. But if you are providing rides or other services in exchange for payments that are delivered through a company that provides an electronic platform and may or may not send you a 1099, what is your tax status?

In this two-part post, we will address that question.

It's a question that contains multiple levels. For starters, there is the classic issue in tax law of whether a worker is an independent contractor or an employee. In California, there is currently a lawsuit in federal court seeking to bring a class action lawsuit on behalf of about 160,000 Uber drivers. The suit challenges the company's classification of the drivers as independent contractors.

But it is also important to recognize that there is more than one type of 1099 form.

Are drivers for services such as Uber service contractors who should get Form 1099-MISC? Or are they business entrepreneurs who should get a different form of 1099, namely Form 1099-K, because a third-party company processed their transaction with the consumer they served?

Clearly this is a very confusing time for tax reporting for those involved with social-sharing services. In part two of this post, we will look in more detail at the multiple factors producing this complexity.

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