Understanding Taxes in a Barter and Sharing Economy

If you make income from the sharing economy it could impact your taxes. Whether you’re thinking about renting your home while on vacation or taking on a side hustle to put some extra cash in your wallet, you need to remember you might need to pay taxes.

The key factors for you to know are that the sharing economy activity is generally taxable! That could include:

• Any income stated on a 1099 or W-2
• A side business
• Part-time work
• Any cash payments received

When it comes to rentals, you will want to keep in mind that there are special rules governing this activity. If you are among those renting out a home or apartment, but who also lives in it during the year, be sure to chat with a check the IRS website or chat with your CPA.

If you do take part in the sharing economy as an employee, you should review your withholdings from your regular job and any other jobs you have to ensure the proper amount of withholdings has been entered on your Form W-4. Many times you can avoid making estimated tax payments just by withholding more taxes from your regular paycheck. Fill out a new W-4 with your employer if you need or want to request additional withholding. You can also utilize the Withholding Calculator tool on IRS.gov to help check your withholdings.

If you need to, make estimated tax payments throughout the year to ensure you do not owe at the end of the year. These payments can help cover your tax obligation and you can use Form 1040-ES to figure the amount of these payments. There are few payment options if you chose to make the estimated payments. The fastest and easiest way is through IRS Direct Pay. You can also use the Treasury Department’s Electronic Federal Tax Payment System. Snail mail is also an option. Be sure to include a tax voucher with your payment.