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Tax Issues and Resources for Small Business and the New Sharing Economy

As an emerging resource over the past several years, the sharing economy could change how you commute, travel, rent vacation places and perform daily activities, especially in relation to your business’ growth—and business taxes.

Sharing economies allow individuals and groups to split the expense of technological advancements while not taking on the sole financial responsibility of the product or service.

Also known as the on-demand, gig, or access economy, sharing economies also help alleviate some of the stress of business income tax obligations, especially for the self-employed and small business owners.

Due to the possible tax implications for companies or individuals providing these services, the IRS launched the new Sharing Economy Resource Center website (https://www.irs.gov/businesses/small-businesses-self-employed/sharing-economy-tax-center) designed to help you locate information regarding your tax obligations when participating in sharing economies.

The site offers tips and resources on a variety of topics ranging from filing requirements, estimated tax payments, self-employment taxes, and tips for both individuals performing services and companies providing services.

According to the IRS, the following key points are additional tax issues in the sharing economy:

  • Taxes. Income received from a sharing economy activity is generally taxable, even if the recipient doesn’t receive a Form 1099, W-2 or other income statement.
  • Deductions. For those who qualify, simplified options are available for deducting many business expenses.
  • Rentals. Usually, rental income must be reported in full unless the dwelling unit is rented out fewer than 15 days per year, in which case no rental income is reportable. Deductible expenses such as mortgage interest, real estate taxes, casualty losses, maintenance, utilities, insurance and depreciation, reduce the amount of rental income that is subject to tax.
  • Estimated Payments. If you’re involved in the sharing economy, you must remit estimated tax payments during the year to cover your obligation.
  • Payment Options. Estimated tax payments can be made electronically using IRS Direct Pay or through the Treasury Department’s Electronic Federal Tax Payment System.
  • While using the sharing economy, request your employer withhold additional tax from your paycheck, so you won’t end up owing taxes.

Although sharing economies is a developing resource, the tax implications must be understood for both the companies that provide the services and the individuals who perform the services.

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