Gig work, side jobs and taxes

Delivery apps, tutoring, freelance design and other side work can fit around classes, and the tax side is manageable once you know how it works. This page explains how that income is reported, what self-employment tax covers and which records to keep through the year.

Contractor income and the forms you may get

Most gig and freelance work treats you as an independent contractor rather than an employee. That means no tax is withheld from your pay, and reporting the income is up to you. The income is taxable whether or not a form arrives for it.

Clients who pay you more than a set amount in a year send Form 1099-NEC, and payment platforms and apps may send Form 1099-K. The reporting thresholds for these forms have changed in recent years, so check the IRS website for the current rules. Keep your own record of every payment either way.

Self-employment tax

Employees split Social Security and Medicare taxes with their employer. When you work for yourself, you pay both halves through self-employment tax, which applies once your net earnings from self-employment reach a low amount the IRS sets. You figure it on Schedule SE, alongside Schedule C for the business income and expenses.

Self-employment tax is separate from income tax, so it can be owed even when your income is too low for income tax. Half of it is deductible when you figure your income tax.

Keep through the year

• A log of every payment received
• Receipts for business expenses
• A mileage log if you drive
• Any 1099 forms that arrive

Expenses and estimated payments

Ordinary and necessary business expenses reduce the income you are taxed on. For drivers, that can include business miles at the standard mileage rate the IRS publishes each year, or a share of actual car costs. Keep receipts and a mileage log, because the deduction depends on records.

Because nothing is withheld, the IRS expects people who will owe more than a set amount to make estimated tax payments during the year, using Form 1040-ES. Setting aside part of each payment in a separate account makes the bill easier when it arrives. Your state may expect estimated payments too.

Filing and free help

Self-employment income can mean you need to file a return even if someone else claims you as a dependent. Gig income also counts on a later FAFSA, so keep a copy of the return you file.

IRS Free File offers free tax software to people under an income limit, and Volunteer Income Tax Assistance sites give free in-person help at many campuses and community centers. Some VITA sites prepare returns with self-employment income and some do not, so ask when you book.