Income Tax Rules for Working Odd Jobs

In this modern era, where computer geeks are a prized commodity in the business world, there’s still a strong demand for the “handyman,“ or handywoman, who can do odd jobs around the home. For instance, someone may be needed to move heavy furniture with a truck or run errands for an elderly person. This demand for “unskilled labor” is being met in the sharing economy through various companies.

The range of services is vast and continues to expand, so there’s plenty of opportunity for people with spare time to earn cash. Some of the most prominent offerings are as follows:

With Task Rabbitt, workers perform unskilled tasks like picking up groceries, assembling furniture and doing yardwork.

Takl enables workers to earn side cash on their own schedules for doing small chores like painting and mowing lawns.

Bellhops and Dolly are for heavy lifters. In some cases, you may need to provide the vehicle needed for the service.

Schlep helps people move stuff from one location to another nearby. Workers have to supply the form of transportation and some muscle.

DogVacay is a pet-sitting operation. It may also include related services such as dog walking, grooming and taking the pooch to the park.

The benefits for workers in this field are obvious. Instead of having to hunt down jobs and pursue leads that often end up empty, the companies arrange the gigs. All you have to do is show up on time, do the work and collect the payment. Of course, then there are always taxes to worry about, however.

The IRS is reminding taxpayers in the sharing economy that taxes are a year-round concern –not just when you file your return.

For starters, if you receive payments during the year as an independent contractor, as most odd jobs workers in the sharing economy do, you probably need to make estimated tax payments. Typically, payments are required on income received that isn’t subject to withholding. You may also pay in estimated taxes to avoid penalties if the income tax withheld from your salary, pension or other income, such as a regular job, isn’t enough to cover your tax for the year.

Taxes are a pay-as-you-go proposition. Making estimated tax payments is how you pay-as-you-go. Taxpayers can use estimated tax payments to address both income tax and self-employment tax (i.e., Social Security and Medicare). If you don’t pay enough tax through either withholding or estimated tax, or a combination of both, you could be hit with a penalty.

The payment of estimated tax for income earned during the first quarter of 2017 – January 1 through March 31 — is due on April 18. The deadlines for the three subsequent quarters are June 15, September 15 and January 16 of next year. If you don’t pay enough tax by these dates you may be charged a penalty — even if you’re due a refund when you file your return.

On the other side of the coin, you can deduct business-related expenses, including depreciation and other costs attributable to the business use of a vehicle. But the IRS imposes special rules concerning deductions for vehicles and strict recordkeeping is an absolute must. Take the business expense deductions you’re legally entitled to claim, but no more.