Sharing in the sharing economy

The IRS has launched a website to help sharing economy participants contribute their fair share of taxes.

In 2014, more than 2.5 million US taxpayers earned income through sharing economy services such as Airbnb, Uber and Etsy. But it’s likely that much of that income went unreported because the US tax system has failed to keep up with these new services, reports The Fiscal Times, based on a study by researchers at American University in Washington, DC. Result: the IRS could be missing out on billions in tax revenue.

One of the problems is that sharing economy participants often do not receive forms such as 1099-K, which companies are supposed to file when they earn more than US$20,000 through 200 or more credit transactions, or 1099-MISC, which covers payments of more than US$600 to independent contractors, freelancers and small businesses. As a result, says the study, “existing tax rules effectively create a US$19,399 reporting tax loophole impacting millions of taxpayers.”

The IRS is now trying to fix that loophole by launching a website aimed at helping those in the sharing economy to ante up their share of taxes. Called the Sharing Economy Resource Center, it deals with topics such as filing requirements, quarterly estimated tax payments and self-employment taxes. The site notes that “if you receive income from a sharing economy activity, it’s generally taxable … This is true even if you do it as a side job or just as a part time business and even if you are paid in cash.” But it also points out that, “depending upon the circumstances, some or all of your business expenses may be deductible, subject to the normal tax limitations and rules.”