Suppose you're one of the millions of gig workers relying on digital platforms like Uber, Airbnb, Doordash, and others to make a living in this uncertain economy. In that case, you may have heard about an important IRS rule change that will take effect next year.

This new policy affects how many people file their taxes as independent contractors or freelancers; specifically, it limits tax deductions for those earning a certain amount from gig work.

While this is concerning news for affected individuals, there is a glimmer of hope: The IRS announced giving gig workers until 2022 to fully understand and comply with these new regulations.

In this blog post, we'll discuss why these changes will come into effect sooner than expected but with extra time given so workers can prepare – plus some tips on navigating the transition!

Overview of the IRS Tax Change for Gig Workers

The IRS recently announced a major change to how gig workers file taxes. Starting in 2021, freelancers, independent contractors, and other "gig economy" workers will no longer be able to use the 1099-MISC form but must use the new Form 1099-NEC (Nonemployee Compensation).

This makes it easier for the IRS to track income and taxes paid by gig workers. The change was supposed to take effect in January 2020, but the IRS has extended the deadline until 2021. This gives gig workers an extra year to prepare for this major tax change.

To comply with Form 1099-NEC regulations, gig workers should review their contracts, track all income earned from each client, and ensure they understand how to properly report income. It's also important for gig workers to understand the tax implications of their circumstances.

Working with an accountant or other professional familiar with the new forms and regulations may be beneficial if they need more guidance. With this extra time, gig workers should take advantage of available resources to ensure they comply with the IRS and that their taxes are properly filed.

This change affects many gig workers and could significantly impact their tax filing. Fortunately, the IRS has given them an extra year to prepare for this major change. With the proper preparation and guidance, gig workers can be ready to take on this new challenge.

Why this change is being made to Benefit Gig Workers

This new change from the IRS is being made to benefit gig workers and make filing taxes easier. Using Form 1099-NEC, the IRS can more accurately track income and taxes paid by gig workers. This will help ensure that gig workers properly report their income and pay necessary taxes.

Additionally, this change should help reduce potential issues related to unpaid wages or taxes by employers. By providing gig workers an extra year to prepare for this major change, the IRS is giving them additional time to ensure they comply and file their taxes correctly.

Additionally, it gives gig workers more access to resources such as tax professionals that can help them understand the implications of this new form. Overall, this change should benefit gig workers by providing additional guidance and resources to help them understand their tax obligations.

By taking advantage of this extra time, gig workers can be better prepared for this major change from the IRS.

What Will Happen After The Tax Deadline Extension

After the tax deadline extension, gig workers can complete their taxes under the new regulations. Gig workers must understand how to properly report income and pay necessary taxes.

Gig workers should also use resources such as tax professionals or software to help them navigate this process. Additionally, they should use the extra time to review their contracts and track all income earned from each client.

The IRS will also be able to more accurately track income and taxes paid by gig workers with the new form, which should reduce potential issues related to unpaid wages or taxes by employers.

Overall, this deadline extension benefits gig worker as it gives them additional time to prepare for this major change and access the necessary resources to ensure compliance. With proper preparation, gig workers can be ready to take on this new challenge.

Steps To Take To Maximize Your Benefits From the Tax Changes

Gig workers should take advantage of the extra year to prepare for this major tax change by the IRS.

First, review your contracts and track all income earned from each client to ensure you understand how to properly report income and pay any taxes due.

Second, use any available resources, such as tax professionals or software, to help navigate the process and maximize benefits.

Third, if you are still determining any aspect of the new regulations, reach out to an accountant or other professional who is familiar with the new forms and regulations.

Finally, understand the tax implications of your circumstances. This could include deductions, credits, or other tax breaks that may be available.

By taking these steps before the deadline extension ends, gig workers should be able to maximize their benefits and meet the IRS's new regulations.

Tips on Keeping Up With the Latest IRS News and Regulations

Gig workers should keep up with the latest IRS news and regulations to ensure they comply with the new form.

The best way to do this is to sign up for email alerts from the IRS, stay up-to-date on the news about tax-related changes or updates, and follow any resources such as tax professionals or software.

In addition, gig workers should take advantage of the extra time before 2021 to ask questions and seek professional advice. This could include reaching out to a tax adviser or accountant for guidance.

Finally, research it thoroughly if you need help understanding filing forms or regulations. Many websites offer resources and answers to frequently asked questions.

By taking these steps and staying informed, gig workers can ensure they comply with IRS regulations and maximize the benefits of their filing.

FAQs

What is the change?

The IRS has granted an extra year for gig workers to prepare for new 1099-NEC filing requirements. This means they have until 2021 to file 1099-NEC forms instead of 2020. The IRS and employers use the 1099-NEC form to report payments made to non-employees, such as independent contractors and freelancers, for services rendered.

How does this affect gig workers?

The extra year given by the IRS provides gig workers with more time to adjust to the changes and get their paperwork in order. It also gives them more freedom to focus on growing their businesses without worrying about the additional burden of filing 1099-NEC forms immediately. This is especially beneficial for those who may only have been aware of the changes recently.

When does it go into effect?

The changes are expected to go into effect as of January 2021. Gig workers should begin preparing to ensure all their paperwork is in order before the deadline. It's important to note that gig workers may need to update their accounting and tax preparation software to comply with IRS guidelines.

Conclusion

The news of the IRS tax rule changes for gig workers is concerning, but it's good to know that more time is being given to prepare properly. The IRS is aware of how many people rely on gig platforms and platforms like Uber, Airbnb, and DoorDash as sources of income and wants to allow them to adjust their filing strategies.

To put it plainly: Gig workers have an extra year to prepare for this major mechanical change in policy. Take advantage of this additional time and start planning today - remember, the IRS just gave gig workers an extra year to prepare for a major tax change!