US Highlights Sharing Economy Tax For Small Business

; posted on
May 3rd, 2018

As from April 29 to May 5, 2018, the Inland Revenue Service (IRS) in the US holds the alleged National Small Business Week to coach small business owners and the self-employed on identifying their tax liability and enhancing tax compliance, considering there are new tax law changes enacted last December affecting them. Typically, the IRS highlights the sharing economy tax.

Pay-As-You-Go

Economic operators are involved in the sharing economy if they employ one of the many online platforms available to provide services, like accommodations or car rides. Taxpayers involved in the gig economy are liable to return to the authority on receiving the income instead of paying at the end of the year, this is called “pay-as-you-go”. In order to limit the risk of penalties, taxpayers may estimate the tax due if the amount of income tax withholding from salary, pension or other income of the taxpayer is not enough to cover your tax for the year.

Paycheck Checkup

In recent years, the IRS has seen an uptick in people subject to estimated tax penalties. Most of the 10 million people facing such bills in 2015 underpaid their taxes. The IRS urges taxpayers to check into their options to avoid these penalties by using the newly-revised Withholding Calculator. This is especially important for people in the sharing economy, those with more than one job and those with major changes in their life, like a recent marriage or a new child. Two alternatives are available to pay tax:

  • Withholding from pay, pension or certain government payments, such as Social Security;
  • Making quarterly estimated tax payments during the year.

Sources: IRS

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