In case you missed it, our CEO Matt Spoke recently sat down with april’s Head of Tax Strategy, Jody Padar, in an episode of Whose Line Is It Anyway? to discuss specific ways tax situations are unique for gig workers. If you’re a gig worker or a driver, this episode is a must-listen. You’ll get valuable insights into tax preparation and filing, and learn how to maximize your deductions.
You can listen to the full episode by clicking on this link to listen on Spotify or this link to listen on Apple Podcasts. But if you prefer to read the highlights, we’ve got you covered too! Read on, Moves members.
Gig workers, or independent contractors, often miss out on tax deductions because they are unaware of what expenses they can write off. Jody Padar, a CPA and Head of Tax Strategy at our partner april, explains that gig workers can take all the same business deductions that regular business owners do. The IRS views business deductions as “ordinary and necessary” expenses for the business. Padar explains that the type of work that a gig worker does determines the specific business deductions they can claim.
For example, an Uber driver can claim automobile expenses, while someone working for Fiverr can claim different expenses. Padar advises that the IRS has publications that outline the specific deductions that are allowed for each job.
When it comes to driving gigs, Padar says that expenses like cellphone bills and mileage are deductible, as well as office expenses, which in this case is the worker’s car. Gig workers can either take a mileage amount or depreciate their car and take actual expenses like gas and car washes. The mileage amount is typically the biggest expense. If a gig worker has a uniform, they can also deduct the expenses related to cleaning it.
Padar notes that gig workers who are new to working as independent contractors may find the tax system confusing. She explains that gig workers are required to make quarterly estimated tax payments. This means that they need to set aside money or pay the IRS based on the income they earn each quarter. Unlike W2 employees, gig workers do not have withholding out of their paychecks, so they need to make sure they plan and budget for these payments. Padar advises that it is ultimately to a gig worker’s benefit to pay estimated payments because it prevents surprises at year-end.
In conclusion, gig workers can take advantage of tax deductions by understanding what expenses they can write off. The type of work they do determines the specific deductions they can claim. For driving gigs, expenses like cellphone bills, mileage, and car expenses are deductible. Gig workers are required to make quarterly estimated tax payments, which can be confusing for those new to working as independent contractors. Planning and budgeting for these payments are important to prevent surprises at year-end.