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Gig work is becoming more and more common and you may have questions about what this is and how to report it.
Gig work is classified by the IRS as an activity where people earn income providing on-demand work, services or goods. Often, it's through a digital platform like an app or website. You may be familiar with this type of work if you have ever used DoorDash, Grub Hub, Uber, or any kind of delivery service.
Gig work also includes any kind of temporary side jobs, such as mowing someone's grass, handyman work, running errands, or selling items online.
According to the IRS: You must file a tax return if you have net earnings from self-employment of $400 or more from gig work, even if it's a side job, part-time or temporary.
In certain cases, you may receive a 1099-NEC form for nonemployee compensation if you make more than $600.
This is entered under the Federal Income section of your return by clicking Show More next to Miscellaneous Income and then you'll click Start next to Income from 1099-NEC.
You will fill in the information into the software as it appears on the form you received. You do not need to worry about filling in anything that does not appear on your form.
After you do this, you can then select to report this income on a new Schedule C form. The Schedule C form is where the income is carried to and you can then enter any expenses for the work performed, such as mileage, supplies, meals, travel, insurance, and vehicle expenses.
If you do not receive a 1099-NEC, you can enter the income directly on the Schedule C form in the software and then enter any expenses. The Schedule C is located under the Federal Income section as well by clicking Show More next to Business Income or Loss.
Gig Work And Reporting Self-Employment Income On Schedule C
Gig work simply stated is work you perform as an independent contractor or as a free-lancer. Examples would be working for Uber or Lyft or maybe you perform consultations occasionally for a company where you are not an employee. Some other examples would be tutoring, construction work, food service.
The work you perform is usually short term or even one time.
You don't have to be considered a business entity to report your self-employment income on schedule C.
Taxes are typically not withheld from self-employment income and so self-employed individuals have the responsibility to pay Federal State and Self-employment taxes on their income.
Typically, a 1099-NEC will be issued to you by the company or person you've performed work for. It will be issued if you've been paid $600 or more for the work you've performed.
1099-K is another form you may receive and it reports payments you've received for services or a product you offer. PayPal and Venmo are examples of companies who issue form 1099-K.
W-2 with Box 13 checked as a Statutory Employee - You will enter your W-2 and check box 13 For a statutory employee then go to schedule C to claim your expenses.
Cash or Check is often received and no tax form is provided by the Payer, so it will be up to you to keep record of these payments throughout the year.
OLT provides access for self-employment income to be reported on your tax return.
I've entered my self-employment income form from the Payer but not sure if I should file a schedule C or where to report the income on my return.
Typically, the income you've received should be filed on schedule C and you will see the option to report it on schedule C as you enter your form in the income section of OLT software.
Once you elect to report the income on schedule C, the income information you've provided on the form will transfer to a schedule C by OLT software.
If you prefer to report the form directly in schedule C, there will be links in the Gross receipts section you can click to enter your income information from the corresponding form.
I'm not a business so why should I report the income on schedule C?
Although you may not recognize yourself as a business entity, the IRS recognizes the income you've received for your work as self-employment income where self-employment tax is then applied.
Schedule C offers self employed individuals to take deductions related to their self-employment income, thereby reducing their tax liability.
Keep in mind that when you begin to fill out schedule C the questions being asked pertain to you and what you do - not to the company you performed the work for. Although schedule C seems as though it is asking about the business your worked for,
or some of the verbiage uses the word "Business", use your information. OLT understands questions can be confusing and that's why we are here to help.
There are two ways you can access schedule C. Once you are logged into the software, on the left navigation menu please click Federal then Income below it. When the Income Summary page opens, please scroll down the page to Business Income and Losses,
then click the 'Show More" button and click the Start button across from to Business Income or Loss - Schedule C.
The other method is to type schedule C in the form search field on the upper right corner within the software. When the schedule C result appears, then click the result and you will be taken directly to the beginning of Schedule C.
Schedule C in the OLT Platform is aligned with the IRS's form schedule C, so when you input information, OLT will generate and transfer your information to Schedule C.
I am overwhelmed and not sure what or where to enter everything in Schedule C
Collect all your receipts and Statements related to your self-employment income. If you've used your vehicle, get records and receipts of the mileage, repairs specifically used for self-employment income related to your vehicle.
If you plan to include a home office, whether you own or rent your home, you will want the total square footage of your home then square footage of the space you use specifically for your home office. Retrieve and organize your receipts.
If you've lost any, you can usually retrieve them by looking up your bank statements then contacting the store to send a copy of your receipt.
Schedule C checklist
The OLT platform for schedule C has a checklist page with each category you will need to review in order. The checklist should be followed in order and we do suggest you review each one in case you overlook something or are eligible for something you may not have realized.
One or more of the categories may not apply to you, but its still a good idea to go through each and review them thoroughly, then proceed to the next in order.
Checklist Page:
The 1st button Is Business information and will contain questions relative to you and not to be confused with the business you worked with.
The 2nd button "Material Participation / Self-Employment Health Insurance / Contribution to Self-Employment Retirement Plan" will contain questions will ask questions about material participation, if you had health insurance or a retirement plan.
The 3rd button Gross Receipts (Income), Returns and Allowances will contain questions about the income you've reported and is also where you can input income forms if you didn't do so previously. It's also for refunds you may have provided.
The 4th button "Cost of Goods Sold" is used for reporting inventories and costs for the products you sell and for the costs to create or re-sell your items.
The 5th button "Depreciation" is for depreciation of items you purchased to do the job such as tools, office equipment.
The 6th button "Amortization" is for deducting certain capital costs over a fixed period of time and used for star up costs.
The 7th button "Other Expenses" is for inputting items like paper, small items you purchase to do your job and miscellaneous items that won't last more than year.
The 8th button is for Business use of Home/At Risk. This is where you will enter the Business use of your home and where you would also indicate if you've used your own money or borrowed money for the business. A loss may only be deducted up to the amount you personally have at risk, and no more.
I did a couple of jobs that are not the same type of work, should I create a schedule C for each?
Let's say you have self-employment income from a delivery job but have self-employment income from a house cleaning job,
then you would want to make a schedule C for each because the expenses related to each will most likely be different
I am being asked if I "Materially Participate" - What does that mean?
Material Participation means you are consistently involved in work to make substantial income.
The IRS has seven material participation tests, and if you meet any 1 of them, then you are considered as "Materially Participating".
You want to keep good records of time spent working and a good mileage log if your income requires use of a vehicle to do your work.
To see if you are eligible, please read the following link:
https://www.irs.gov/pub/irs-pdf/p925.pdf#page=5.
How do I know if I made any payments in 2023 that will require me to file a form 1099?
If you create or re-sell items online and paid for production, material, or purchases of the items you sold, you would enter this information under our "Cost of Goods sold" within your schedule c in OLT software.
What is depreciation of property and how does that apply to me?
If your work requires you to purchase a car, machinery, computer, tools or other assets of long shelf life and value specifically to do your job, it may be beneficial to claim depreciation on the assets,
as these can be deducted on subsequent tax returns in the following years over a period of time. Inventory or small items like paper, pens are not applicable.
I have a Home office and want to claim a deduction for it, how do I do that?
A home office can offer a nice deduction. It's a good idea to determine whether you will use the regular method or simplified option to determine what you want to deduct.
An IRS article is provided to further explain the home office deduction:
Topic No. 509 Business Use of Home | Internal Revenue Service (irs.gov).
The home office deduction is located in schedule C under the home office category, on the schedule C checklist.
