What Gig Economy Workers Need to Know About Managing Taxes

 Posted on July 08, 2025 in Taxation Law

The gig economy has provided flexibility for many workers, as well as a variety of new opportunities for earning income. Rideshare drivers, freelance designers, and many other gig workers enjoy the ability to work on their own terms, but with this flexibility comes a unique set of tax responsibilities. Determining what forms to file, what information to submit, and when taxes must be paid can be overwhelming, especially for those who are unfamiliar with tax law. An experienced tax attorney can help gig workers navigate these challenges, respond to inquiries from the IRS when necessary, and avoid potential penalties.

Keeping Records: What Gig Workers Need to Track

Proper recordkeeping is critical for anyone earning income in the gig economy. The IRS requires gig workers to report all income, but it also allows them to deduct certain business-related expenses. To do this accurately, it is important to maintain detailed records throughout the year.

Income Records

Gig workers need to track all income earned from their work, whether or not they receive tax forms from the companies they work with. These records may include:

• Form 1099-K: This form is provided by third party settlement organizations (TPSOs), which include companies like Uber, Lyft, and DoorDash, as well as freelance marketplaces, crowdfunding platforms, and other online marketplaces. It may be used when the payments a worker receives from a TPSO exceed a certain threshold in a tax year. For tax year 2024, this threshold was $5,000. In 2025, the threshold will be $2,500. In future years, the threshold will be lowered to $600.

• Form 1099-NEC: This form will generally be issued if a worker earns $600 or more from a company or client for freelance work.

• Form 1099-MISC: This form may be used for other types of income, such as royalties.

• Direct Deposits and Bank Statements: Income earned can be verified by tracking deposits into a bank account, and this information can also track payments received from anyone who does not provide tax forms.

Expense Records

Gig workers can deduct business-related expenses, which will lower their taxable income. To claim these deductions, it is important to keep receipts and documentation for:

• Vehicle expenses (mileage, gas, maintenance, and insurance for rideshare drivers)

• Supplies and equipment

• Cell phone and internet bills (if used for business purposes)

• Home office expenses (if applicable)

• Marketing and advertising costs

Apps or accounting software can help track these items efficiently.

Paying Estimated Taxes: When and How

Unlike traditional employees, gig workers do not have taxes withheld from their paychecks. Instead, they are considered self-employed and must pay estimated taxes throughout the year if they expect to owe $1,000 or more in federal taxes during the year.

Quarterly Deadlines for Estimated Taxes

The IRS requires estimated tax payments to be made four times per year:

• April 15: For income earned January 1 – March 31

• June 15: For income earned April 1 – May 31

• September 15: For income earned June 1 – August 31

• January 15 (Following Year): For income earned September 1 – December 31

Form 1040-ES is used to calculate the amount of estimated taxes. Payments may be made to the IRS online or by mail.

Filing Annual Tax Returns: What You Will Need

When filing tax returns each year, a gig worker must report all income, and they may deduct eligible expenses to determine their taxable income.

Information Needed for Filing

Gather the following before preparing a tax return:

• Income Forms: 1099-K, 1099-NEC, or other records of earnings

• Business Expense Records: Receipts, mileage logs, and statements

• Self-Employment Tax Payments: Records of quarterly estimated tax payments made during the year

Tax Forms to File

• Form 1040: The standard federal income tax return

• Schedule C (Form 1040): To report income and expenses from self-employment

• Schedule SE (Form 1040): To calculate self-employment taxes for Social Security and Medicare

Contact Our San Jose Tax Attorney for Gig Workers

Navigating self-employment taxes can be complex, especially for first-time gig workers. Mistakes can lead to IRS penalties, interest charges, or missed deductions. By working with a tax attorney, gig workers can make sure they comply with tax laws while making the most of allowable deductions. At John D. Teter Law Offices, our San Jose, CA tax lawyer can provide guidance for gig workers, and we can help address any disputes with the IRS while working to minimize potential penalties. To learn more about legal services available at our firm, contact us at 408-866-1810 and schedule a consultation.