Gig Workers Could Get A Nasty Surprise This Tax Filing Season—Particularly On State Returns

The number of gig workers in America has been growing in recent years, but the COVID-19 pandemic has accelerated that trend. Before the pandemic, around 41 million Americans were already classified as gig workers (defined as independent contractors or other non-traditional form of employment). 

Following the outbreak of a pandemic and recession, we not only rapidly changed the way we consume things, historic unemployment made gig work a way for folks to make ends meet. Ridership on Uber UBER -2.1% and Lyft’s LYFT +1.3% ride-hailing services plummeted, but grocery-delivery services like Instacart and meal-delivery services like Uber Eats and DoorDash saw increased demand and new workers join in droves.

In fact, GigSmart, which connects employers with gig workers, reported a 25% increase in the number of gigs completed per day during the first three months of the pandemic. 

But delivery drivers juggling work on multiple platforms might be in for an even tougher juggling act when it comes to filing their income taxes. That’s because more states are now requiring gig-economy workers to report their earnings through a 1099-K form, even if they don’t receive one from the company with which they have a contract. 

In fact, many gig workers don’t receive these forms because the IRS only requires platform companies to send one if a contractor earns more than $20,000 over 200 transactions. Some 80% of gig economy workers who earn less than $20,000 in a year from a company don’t receive a 1099-K.