The Gig Economy and the New Tax Law
RALEIGH, N.C., Jan. 24, 2018 /PRNewswire/ According to a study by LinkedIn, 43 percent of the U.S workforce will do some form of freelancing by 2020. This includes Uber drivers, multi-level marketing distributors, and online sellers as well as various service providers. Even though the new tax law has many provisions favorable to small businesses, many in the gig economy could lose their deductions.
Certified public accountant Lisa London says the IRS may consider a business a "hobby" and therefore, the related deductions would be disallowed. Before 2018, the side business' expenses could be deducted up to the amount of sales made if the taxpayer itemized his deductions.
But no more. With the doubling of the standard deduction, the new law suspended the deductibility of Other Miscellaneous Deductions. This means the income must be reported, but the related expenses are only deductible if the IRS would consider it a business and not a hobby.
London wants those in the gig economy to understand the steps they can take to be considered a for-profit business. First and foremost, entrepreneurs must keep complete and accurate records that are separate from their personal finances. Secondly, they must show intent to make a profit, which should include business and marketing plans. If their side business is also a fun activity, they'll also need to document the less fun sides.
CREDENTIALS: LisaLondon, CPA, is the author of "The Accountant Beside You"series of resources which are being used by tens of thousands of organizations around the world. Her book, BANISH Your Bookkeeping Nightmares-The Go-To Guide for the Self-Employed to Save Money, Reduce Frustration, and Satisfy the IRS, includes detailed steps on how to file self-employment taxes, set up accounting systems, and what is and isn't deductible.London has been a CPA for three decades and specializes in assisting small businesses, nonprofits and churches. She has been quoted in U.S. News and World Report and featuredonthe nationally syndicated "EdTyllShow,"North Carolina Public Radio's "The State of Things,"and on CBS or ABC affiliates in Pittsburg, Kan., Greenville, N.C., and numerous other stations around the nation.
AVAILABILITY:North Carolina, nationwide by arrangement, and via telephoneor Skype
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SOURCE Lisa London