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3 Things to Know If You're Not Experienced with Gig Work

 

 

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3 Things to Consider if You're new to gig work

 

by Kelsey Sheehy Senior Writer | Personal finance, small-business, and personal business Kelsey Sheehy is a senior writer and NerdWallet's expert on small business. She started at NerdWallet in 2015 and spent the next six years working as a financial journalist and spokesperson , before shifting to focus on the financial decisions and challenges faced by owners of small businesses. Kelsey's work has appeared throughout The New York Times, The Washington Post, Nasdaq and MarketWatch, among other publications. She writes a column on millennials and money in The Associated Press along with a handful of other NerdWallet writers. Kelsey has been featured on the "Today" show, NBC News and ABC's "World News Tonight" and has been quoted by the Los Angeles Times, CNBC, American Banker, NPR and Vice as well as other publications. prior to her being a part of NerdWallet, Kelsey covered college (and how to pay for the cost) for U.S. News & World Report. The location of her work is Washington, D.C.

 

 

 

 

 

 

The publication was published on January 29, 2021. at 6:00 AM PST

 

 

 

Edited by Kirsten VerHaar Senior eBay and Yahoo! Kirsten VerHaar works as an editor of personal finance, with an English literature degree from the University of Colorado Boulder. In her previous roles, she was a lead editor with eBay, where she managed a team of writers who wrote about eBay's content team across the globe. She also wrote for Yahoo. Since she joined NerdWallet since 2015 she has covered topics as wide-ranging as vacuums (yes they really exist!) budgeting, as well as Black Friday.

 

 

 

 

 

 

 

 

 

 

 

Many or all of the products featured here are provided by our partners who pay us. This impacts the types of products we write about as well as the place and way the product is featured on a page. However, this does not affect our opinions. Our views are our own. Here's a list of and .

 

 

 

 

Shutdowns, layoffs and pay reductions brought about by the government have caused millions of Americans searching for new sources of income. People who have recently shifted to gig work may be days away from a financial shock in the shape of tax bills unexpectedly incurred and insurance coverage fine print.

 

"These are two of the most important aspects that many new business owners don't think about," says Chris Russell who is a certified financial planner who has a specialization in business owners and self-employed.

 

Don't consider yourself an owner of a small business? Well, let's start there.

 

To the IRS, you are an individual business

 

Sure, you're operating food delivery. However, that's not enough to make you a small business in the eyes of the IRS. And that opinion is the only one that matters in the tax world.

 

"Basically, you're considered as an individual contractor" states Garrett Watson an analyst in senior policy at the Tax Foundation, a nonprofit organization. "You aren't required to create anything complex. You don't need to incorporate or anything like this."

 

However, you will need to pay taxes on any money you earn through gig work. This is usually an unpleasant, and costly unexpected surprise for gig workers who are just starting out. When you are an employee, your earnings and payroll taxes are automatically withheld from your pay. That's not the case for gig workers, Russell says.

 

"No taxes are taken out of the earnings you earn as a business proprietor," Russell says. "Meaning that you will likely owe a lot of money in tax to IRS in the event that you submit your taxes."

 

A good rule of thumb that you should follow is: for each dollar you earn from gig work, you should save 30% to be able to apply to your income and . Going forward, plan to estimate and pay those taxes each quarter to avoid penalties from the IRS.

 

And if you're thinking "I haven't made a lot of money. I'm not going to report it. How will the IRS know?" Don't. It'll know.

 

Get the most value for your cash

 

Monitor all your spending in one glance to assess your patterns and identify opportunities to reduce your expenses.

 

 

 

 

 

 

 

 

 

 

 

The expense tracking app is your most trusted buddy

 

The gig work you do isn't just cash in the bank. There are expenses to be incurred, too. Keep track of those since you could take some of them off and reduce that tax bill that we mentioned a second ago.

 

"Keep good and honest documents to make the most of any deductions you are legally entitled," says Ryan Greiser an expert certified financial planner from Doylestown, Pennsylvania.

 

Apps like Stride, Hurdlr and MileIQ automatically track your mileage and expenditures, at no cost or a minimal cost to assist you in calculating taxes. Based on your particular circumstances, Greiser suggests QuickBooks may be worth looking into.

 

"It is a small investment to , estimate your quarterly taxes, monitor the mileage you drive and pay your quarterly tax on the internet," Greiser says.

 

Also, you should research the nuances of what could and shouldn't be deducted based on the portion of your gig work, Watson states, pointing to ride-hailing as an illustration.

 

Imagine you drop a rider off and drive across town to find the next one He says. Can you deduct the cost of fuel used between rides? (You can. )The is a great resource to find answers to your concerns.

 

Insurance can be complicated

 

The IRS isn't alone that needs to know about your new source of income. Insurance agents must be aware, too. In the event of not disclosing your work, it could result in you being removed from your policy in some instances. And, beyond that, your insurance agent can assist you in understanding what aspects of your gig work are protected.

 

Are you transporting people or food? It's important to find out the extent to which your auto insurance policy covers incidents while you're at work. (It most likely won't.). Commercial or rideshare insurance can be able to fill the gap.

 

While the platform you work on might provide you with a commercial policy but it's only applicable only in certain circumstances. It's crucial to be aware of the specifics of this policy.

 

Uber and Lyft offer commercial insurance for drivers, but it applies only if you have passengers in your car or are on the way to pick up passengers after having accepted the ride. DoorDash will only cover liability and only when food is in your vehicle. Grubhub and Instacart do not offer commercial insurance for delivery drivers on their platforms.

 

This article originated from NerdWallet and was originally printed in The Associated Press.

 

 

 

About the writer: Kelsey Sheehy is a personal finance journalist at NerdWallet. Her writing has been featured by The New York Times, USA Today, CBS News and The Associated Press.

 

 

 

 

 

 

 

 

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