IRS responds to expanding sharing economy with new resources

The IRS launched new online resources for service providers and participants in the sharing economy. Advances in telecommunications have fueled the growth of the sharing economy. More and more consumers are connecting with service providers for shared car services, apartments and rooms for short-term rentals, and some employment opportunities.

Tax issues

Taxation in the shared economy came to Congress’ attention earlier this year when National Taxpayer Advocate Nina Olson told lawmakers that many service providers were unaware of their tax obligations. According to Olson, more than 40 percent of service providers in the sharing economy were unaware of possible estimated tax requirements. Many service providers had failed to set aside funds to pay their tax obligations, Olson added.

Olson urged the IRS to expand its presence in the sharing economy, including the creation of a dedicated web page, online tools such as a mileage log app and an estimated tax payment calculator, to assist taxpayers in the sharing economy and improve compliance with the tax laws. The IRS responded in August with a dedicated webpage for the sharing economy.

New web resources

The new online Sharing Economy Resource Center contains links to more information about income taxation and withholding, filing requirements, estimated tax payments, rental income, and more, including depreciation, business expenses, and employment taxes.

The IRS reminded taxpayers that income received is generally taxable, even if the recipient does not receive a Form 1099, W-2 or some other income statement. This is true if the sharing economy activity is only part-time or a sideline business and even if the recipient is paid in cash, the IRS highlighted on its webpage.

Special rules generally apply to the rental of a home, apartment or other dwelling unit that is used by the taxpayer as a residence, the IRS explained. Generally, rental income must be reported in full, any expenses need to be divided between personal and business purposes and special deduction limits apply. However, special rules apply if the dwelling unit is rented out fewer than 15 days during the year.

If you have any questions about the sharing economy and federal tax rules, please contact our office.

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Written by

Steve Moss, CPA is a partner at Holden Moss CPAs and loves helping businesses and their owners grow to be the very best they can be. Our other offices include Raleigh, Oxford and Warrenton. We are a little different at Holden Moss CPAs. While we still provide traditional tax and accounting services, years ago we realized many clients wanted help in running their businesses and were hungry for ideas, solutions, strategy, and execution. In response, we expanded our skill set and joined Ran One, a global network of business consulting firms. Our membership with Ran One gives us access to proprietary resources and analytical software to help our clients grow, become more profitable and valuable, and have the lifestyle they desire. Now, blended into the fabric of our normal tax and accounting needs, we are focused on our clients’ businesses in a very different way. While our approach is not right for everyone, for those whom it is, incredible results may be obtained. Whether you have a new, or established, business, or for those in transition of selling or retiring, or for those who simply need to develop an exit strategy or succession plan, our unique approach to client service may be the edge you need.

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