The pandemic has forced many tax changes this year, and the IRS is aware of that. The service keeps an eye out for people who have taken part-time jobs to achieve their goals and wants to remind them that taxes are due on that money.
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“Regardless of whether it is a secondary business or a main source of income, taxpayers must state income from the gig economy in their tax return,” it said in a statement.
Officials said that freelancers, independent contractors who use online platforms to connect with customers, including renting their homes or guest rooms or providing delivery services, must pay taxes on that income.
In addition to regular income taxes, those who earn fringe benefits must apply for and pay federal self-employment tax and additional Medicare and social security taxes.
Independent contractors may be able to deduct business expenses, but should review tax rules for using their car or setting up a home office, which are not always tax deductible. Rental income is taxable and special rules may apply to rental properties that are also used as residence during the tax year.
Virginia tax officials are encouraging tax advisors to file filing soon, although possible changes to tax law by lawmakers could result in amended tax returns being required.
“This year we strongly encourage you to also file electronically and request a refund if you received one via a direct deposit,” said Tax Commissioner Craig M. Burns. “This is especially important now as the COVID-19 workplace logs mean that it can take longer than is normal for processing a paper return.”