Avalara Survey Reveals Gig Economy Workers Surprised by Decreased 1099-K Reporting Threshold

The gig economy has become a significant part of the modern workforce, with many individuals turning to platforms like Uber, Airbnb, and Etsy to earn a living. However, new research commissioned by tax automation provider Avalara has revealed that a large percentage of gig economy workers are unaware of recent changes to 1099-K reporting thresholds, which are aimed at capturing unreported online sales income.

According to the survey conducted by Avalara, 61% of gig workers are unaware of the lowered 1099-K reporting thresholds, which have been reduced from $20,000 to $600. This means that payment apps are now required to report significantly more transactions to the IRS. Despite this change, 73% of gig workers surveyed do not know the payment threshold above which they would receive a Form 1099-K and be required to file an IRS tax return.

The lack of awareness around these reporting thresholds could have significant financial implications for gig workers. The survey found that 37% of respondents believe their business will be profitable following tax season, while 36% expect to break even, and 17% predict they will lose money due to the IRS changes.

In response to these new reporting requirements, over 20% of respondents plan to pay a tax professional for the first time. This is not surprising, considering that 37% of gig workers surveyed are receiving a 1099-K for the first time this year. With many gig workers juggling multiple sources of income – 75% have two or more sources, 45% have three or more, and 16% have four or more – the assistance of accountants and bookkeepers will be essential in navigating the reporting and tax implications of these income sources.

Looking ahead to post-tax season plans, the survey revealed a variety of strategies that gig workers are considering to navigate the new reporting thresholds. For example, over 20% of workers are planning to quit one or more of their gig economy jobs to avoid crossing the $2,500 1099-K threshold next year. Additionally, 15% of respondents plan to use tax software for the first time, while another 20% intend to take on more under-the-table work to avoid IRS reporting rules associated with platforms like PayPal and Venmo.

Overall, the survey data highlights the urgent need for gig economy workers to educate themselves on the new 1099-K reporting thresholds and seek professional advice to ensure compliance. As Kael Kelly, General Manager of Avalara 1099 & W-9, stated, “Businesses of all sizes, including independent workers, need a fast, robust, easy, and affordable way to e-file 1099 forms, and that capability is within reach through modern cloud software.”

In conclusion, the gig economy is a dynamic and rapidly evolving sector of the workforce, and it is crucial for workers to stay informed about changes to tax reporting requirements to avoid financial pitfalls. By seeking professional advice and utilizing tax compliance automation software, gig workers can navigate the complexities of tax reporting and ensure their financial stability in the ever-changing landscape of the gig economy.