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Many new ways have arisen for people to make money outside of traditional employment. Among these ways are through providing services or goods through on-demand platforms. Examples of such platforms include Lyft, Uber, Airbnb and Etsy.
A fair chunk of Americans, an estimated over 2.5 million in 2014, use these platforms to earn income. And this number could skyrocket in upcoming years. Some estimates have predicted that, by 2020, the number of platform-based-income-earners could be up to around 7 million.
Taxpayers can sometimes experience confusion regarding what they have to do tax-wise when it comes to income they earned through a new, non-traditional source. Concerns have come up that current Internal Revenue Service rules regarding reporting by on-demand platforms might be adding to the possibility of taxpayers experiencing such confusion in regards to income earned though an on-demand platform.
Under current IRS rules, on-demand platforms are not required to report all income that was paid out to individuals who provided goods or services through the platform. Rather, they are only required to make tax reports of the income to the IRS and the individual for individuals who have either engaged in at least 200 transactions on the platform in a year or who have made $20,000 or more on the platform over the year. On-demand platforms vary in their policies regarding what sort of income reports they make to income recipients that don’t meet either of these conditions.
Given how popular participating in the platform economy is becoming, the possibility that current conditions could make tax-related confusion more likely among those who earn income through this economy is a worrisome one. Tax-related confusion can end up having serious implications for a taxpayer. Such confusion could lead to taxpayer making inadvertent errors on their taxes. Errors in one’s tax filings, even inadvertent ones, can get a person into trouble with the IRS.
One wonders what will happen with the IRS’s rules/guidelines regarding income-reporting by on-demand platforms in upcoming years and what efforts the IRS will be taking to try to reduce the potential for tax-based confusion among participants in the platform economy.
When a taxpayer runs into problems with the IRS regarding income they earned, whether the income was earned through traditional means or through new methods like on-demand platforms, they may want to turn to a skilled tax attorney for help with handling the issue.
