If you're providing services in the sharing economy, you are probably very focused on the money-making opportunities. This is true whether you're renting out your house, driving for Lyft or Uber, or providing some other on-demand service arranged over an online platform.
You may not realize, however, just how tricky the tax obligations that come with this income can be.
Here are three FAQs to help you get started.
What if you don't get a 1099 from the company you work with?
In tax law, the general rule is that income is taxable, with certain exceptions. Indeed, even illegally obtained income is considered taxable.
But there is no exception for the sharing economy.
This means that income earned in the sharing economy is generally taxable. It is taxable even if you didn't get a 1099 form or some other statement of income from the sharing company you were associated with.
What about estimated tax payments?
If you earn money in the sharing economy, you are considered self-employed and therefore are subject to self-employment tax (for Social Security and Medicare).
In practice, this means you will probably need to make estimated tax payments. If you don't, you could run the risk of having to pay a tax penalty for underpaying your estimated taxes.
To be sure, there are exceptions to this. For example, if you work in the gig economy as a side job, and have taxes withheld from your primary paycheck, you could increase the withholding allowances there to provide enough to pay taxes on your social-sharing income.
Generally, though, making estimated tax payments will be needed in order to cover taxes on that income.
Are there any Massachusetts-specifics laws on social sharing?
Yes. Massachusetts passed a regulatory law last year on ride-sharing services. The law puts a tax of 20 cents on each ride and also contains other fees. Boston taxi owners have filed a lawsuit against the law, contending it is unfair because taxis have additional requirements.