Financial Figures

from Valley Business FRONT, Issue 154, July 2021

Hot Yoga

Gig economy brings new questions

I’m getting lots of people asking about how to handle bookkeeping and taxes with gig economy jobs. Uber, DoorDash, and Airbnb are some of the places people are going for income. For those former W-2 workers, suddenly becoming an independent contractor can be confusing.

Whether it’s due to necessity or opportunity, switching from salaried to independent contractor means you’re now a business owner. It’s tough to know what to do when you’re used to an employer taking care of these financial matters.

Should you file quarterly taxes?

Most people confuse profit with income. Taxes owed on the business are all about the bottom line. Before you can decide if you owe anything, you need to subtract expenses from what you bring in. You are keeping track of this, right? If not, see tips below.

A good general rule of thumb is to submit quarterly tax payments if your profits are more than $6,000 a year. The IRS expects businesses to pay quarterly if the amount owed is more than $1000 for the year. That doesn’t mean you won’t owe taxes; it just means you’ll be paying them annually if you do.

Quick tips for keeping more of your money

Whether you like it or not, bookkeeping is essential if you want to minimize your debt to Uncle Sam. Even if you’re just using your car to shuttle people or groceries around, you’re entitled to deduct expenses.

Those mileage reports you get from Uber and DoorDash only count driving miles with people or stuff in your car. You’re allowed credit for travel to and from pickup and drop off points too. That adds up fast.

At 56 cents a mile in 2021, an extra ten miles a day is $1456 a year, assuming a five-day work week. Find a system, whether it’s a notebook in your car or a digital app. You’ll need to record odometer starting and ending miles for the year. For each trip, you must record the odometer readings & date, starting & ending location, the purpose of the trip, and total miles.

Other allowable deductions include a home office. Don’t forget to factor a percentage of utilities and real estate taxes based on the square footage. This must be designated business-only space.

Your cell phone can be deducted as a business expense if you have a landline. So can any related insurance.

If you’re one of the many who have found work in the gig economy recently, it makes sense to get smart about recording and reporting income, expenses, and profits. Doing so can help you earn more.