The Gig Is Up… The IRS KNOWS
Here’s one from the IRS for all those retired folks out there who have been earning a little extra in gig economy jobs.
If your employer doesn’t withhold taxes from your pay, you’re considered self-employed or you’re withdrawing from tax-deferred retirement accounts, you might want to make sure you’re paying the correct amount of estimated quarterly taxes.
It seems the number of people who haven’t paid them or have filed them incorrectly has skyrocketed. Between 2010 and 2014, the number of people penalized for underpaying their taxes rose nearly 40%.
The real sleeper here – and a costly one – is the required minimum distribution from our IRAs and 401(k)s. The money you have to withdraw after the age of 70 1/2 is subject to quarterly reporting and payment. Most brokerages will withhold it for you, but you have to select that option. It is not always automatic.
And 69% of self-employed workers in the gig economy receive no tax information from the platform they use (for example, Airbnb). And the platforms may not be required to report it to the IRS.
And yes, you will be penalized, even if you were unaware you had to file quarterly.
In 2015 alone, the total number of people who were penalized for not filing quarterly returns exceeded the number filing estimated taxes. I know that doesn’t make any sense, but this is the IRS we’re talking about.
And between 2010 and 2015, quarterly taxes due by the same folks grew by 60%. The feds will definitely be looking closely at this area.
And the taxes and penalties can really add up.
But perhaps the best part of this one is an unwritten rule at the IRS: Taxes not withheld or reported are taxes that aren’t paid.
I learned the hard way a long time ago… Whether you knew about it or not, it’s easiest just to pay the taxes. I wouldn’t count on the feds to ignore an area that’s growing as fast as this one.
P.S. Could you be one of the 119 million Americans who is entitled to a “cash rebate?” On December 18, 2015, President Obama quietly signed a bill that gives millions of Americans a chance to collect anywhere from $1,230 to $12,900. Do you qualify? Get the full details here.