Gig Economy & Taxes

Gig Economy & Taxes

This year the world has reached a new understanding of how important it is to have the ability to work remotely and having access to the technology that makes operating independently possible. More and more individuals have been gearing towards self-employment, stimulating the economy on a per-project basis.

With an abundance of resources that enable businesses small and large to reach out to foreign clients and temporary employees, individuals have the chance to earn money and labor through the form of digital gigs.

There have been rapid changes occurring across the world which are forcing an “adjustment regarding workplace relations due to various influences including globalization, technological advancements, as well as unpredictable, often tumultuous, global economics.”

All of these factors create a lasting effect on an individual’s career while shaping the framework of the modern labor market. Freelance or temporary jobs are created from this free market system which is becoming the basis of how businesses operate—this is where the term ‘Gig Economy’ originally stems from.

Temporary jobs for independent contractors and freelancers have their pros and cons. The benefits of self-regulation including having the ability to manage time independently, allowing one to change avenues of what to specialize in as there are no ties to contracts or senior management. With minimal start-up costs, companies have allowed millions of people to become business owners and self-sustainable workers without a long-term commitment.

There is more flexibility within the gig economy as workers are able to take on new projects at their own pace. This level of adaptability allows individuals to focus on their needs over a company that may not have their best interests in mind.

On the flip side, traditional models of the employee, management, and client relations are threatened by the gig economy. Those who are self-employed may also find it more difficult to fully develop their careers in the field they hope to flourish in since they spread themselves thin trying to please multiple companies at once. This can create issues when hoping to create a work-life balance as workers feel the need to be available any time a gig is offered.

“The financial capability, combined with technological advancements in the on-demand industry, has ruled the ‘old’ small business taxing method as no longer practical” which has created a new environment for both the taxpayers and the government. The issue with operating as a temporary or freelance employee is when tax season comes around and there are several avenues where revenue is coming from and it can be hard to keep track of.

There is less tax credibility when it comes to those who are self-employed since the risk of falsifying information is high. Personal resources such as the internet, travel costs, and office supplies are easy to embellish in order to minimize taxes. Since these profits are often deducted when filing taxes so the government keeps a close eye on those who claim large personal resource costs.

Tax compliance, which requires quarterly tax payments, budgets, and a detailed track record can also take up a significant amount of time and effort. Meaning that those operating in the gig economy tend to invest a significant amount of time addressing tax compliance. Gig economy workers are also expected to disclose individual benefits packages and health insurance to maintain a secure job status with the government.

Tax burdens are a leading factor for why individuals move towards the idea of tax evasion or end up leaving the gig economy altogether. Full-time employees have their taxes regulated by the government, which prevents them from dealing with the stress of legal and financial responsibilities that self-employed individuals struggle with.

By Surina Nath