Do Gig Platform Workers Need New Tax Rules Now That Reporting To IRS Is

Non-employee platform-based work seems like a sufficiently distinct phenomenon to require changes to either tax forms or the tax code to accommodate the new work arrangements that have arisen over the past decade or so, but the only truly novel element in platform work might be the online platform.

The IRS maintains that platform work is essentially an internet-fueled spin on the well-established concept of self-employed workers running small businesses.

While those gig economy taxpayers may require increased outreach because they may not have a complete understanding of their tax obligations, the rise of platform work probably doesn’t require any new rules, particularly once information reporting gets underway in its expanded format. Because of the changes in the American Rescue Plan Act of 2021, that expansion is coming.

Increased tax information reporting for participants in platform work is step 1 in increasing compliance, even if compliance isn’t lower than typical for taxpayers with self-employment earnings. Educating taxpayers on their obligations will be the second step, as noted in a previous post.

To that point, there has been a dearth of information about platform workers’ tax compliance in part because it’s hard to identify which taxpayers are doing platform-based work. But the deficiencies in the data the IRS has about platform workers will be dramatically shored up once the information reporting begins. 

The IRS explained, in response to a Government Accountability Office report in May 2020, that there’s no evidence that taxpayers who use platforms to find work are at any greater risk of noncompliance with their tax obligations than any other self-employed taxpayer.

Perhaps the unique challenge for taxpayers who begin platform work is that they often seem to be turning to it to supplement other income or as a bridge between non-platform jobs. Given the ease of signing up with a platform, taxpayers may not initially consider their tax obligations when opting to do platform work. 

The IRS already does outreach to self-employed platform workers, including through its year-old Gig Economy Tax Center, which provides basic instructions on recordkeeping, paying quarterly estimated taxes, and tax return filing.

The principal message is that taxpayers performing platform work who aren’t employees are self-employed and have the same filing obligations as any other self-employed taxpayers. Other options that have been floated for helping platform workers comply with their tax obligations might not be as attractive in the wake of information reporting. 

Check-the-Box

The May 2020 GAO report said the IRS could add a question to Form 1040, Schedule C, “Profit or Loss From Business,” or Form 1099-NEC, “Nonemployee Compensation,” asking whether a taxpayer had performed platform work. That would probably take the form of a checkbox, much like the ones that already ask whether a taxpayer has foreign bank accounts or bought or sold cryptocurrency.

The IRS disagreed with the recommendation to…