Some years ago in its 2020 Report, Intuit® reported the number of freelancers and contractors would increase, and today, Fiverr, Uber and many other companies have validated this predicted rise in contractor-style employment, commonly referred to as the gig economy. This growing market presents tax and accounting professionals with the opportunity to establish a profitable niche that targets gig workers.
While there is an enormous allure having a flexible schedule, freedom from corporate red tape and the chance to earn more money, there are also many responsibilities and challenges facing gig economy workers. These include the following:
- No job security: In an interview with Science X, Susan Coombes, an associate professor at Virginia Commonwealth University, explained that the absence of a consistent wage means that contractors have no sense of job stability and often struggle with maintaining a healthy cash flow.
- Unawareness of responsibilities: Individuals within the gig economy appreciate the freedom of being self employed, yet are often unaware of the accompanying responsibility. Managing taxes, retirement and health insurance is a real challenge that few are prepared to tackle without expert guidance.
- Navigating complex issues: Freelancers and others are often unequipped to deal with complex situations that accompany contractor-style employment. Corporate inconsistency in answering the employee or contractor classification question frequently causes gig workers to deal with absent or delayed payments, and missing tax forms.
Tax planning for gig economy clients
A critical need within the gig economy is education and instruction on tax planning and compliance, especially in light of the Tax Cuts and Jobs Act. Many workers are unaware that they need to pay self-employment taxes, income and state taxes. At our firm, we find clients need help in saving for tax season and, certainly, for their future; making estimated tax payments; collecting, organizing and filing 1099s; and maximizing credits and deductions. In addition, gig workers are especially inclined to lump personal and business expenses together into one account, rather than properly separating them.
Setting clients up with a solid foundation and providing legitimate tax strategies will increase their trust in you, providing opportunities to expand your role in their business success.