Online sharing economies or peer to peer services need to be aware that offering a service or selling a product may trigger tax filing requirements and create a tax liability
Online sharing economies or peer to peer services are continuing to grow and gain popularity. Sharing economies offer a platform for anyone to offer services such as apartment or home rentals, car rides and sharing, pet care, lending or provide goods, basically anything you can think of. Everyone has at least heard of websites such as Airbnb, Uber, Rover, and Etsy, and many have participated in one way or another. Those who were the provider on these sites need to be aware that offering a service or selling a product may trigger tax filing requirements and create a tax liability.
If you are questioning whether or not you have to report your sharing economy income here are a few tips:
- If you are renting a property that you normally use personally, you do not have to report the income if the property is rented less than 15 days. In this case, you wouldn’t be able to deduct any expenses either.
- You are required to report income even if you do not receive a tax form. It is best to keep track of the income you receive and the related expenses from the beginning so you are not scrambling come tax time. You also don’t want to be surprised by a 1099-MISC form and miss business expenses that could have been deducted from it.
- Often this income will be subject to self-employment taxes and if it is significant to you, then estimated tax payments may be required to avoid penalties and a large tax bill in April.
Sharing economies have taken down barriers and made it easy for anyone to enter the online selling market. Even if you don’t think of yourself as an entrepreneur, you may have created your own business by participating as a provider in a sharing economy. If you want to start participating see the links below for more information.
For some ideas on sharing economies that might be a good fit for you check out: https://www.moneynomad.com/100-sharing-economy-apps-websites/
For the IRS’s Sharing Economy Tax Center check out:
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If you have questions or need help, contact our professionals at The Innovative CPA Group at 203-489-0612. Or contact us online.