We all know the famous tag-line “there’s an app for that”, but in this day and age it seems that apps themselves have evolved from just games and time-savers to ways for anyone to make money on the side(some of which can actually become full-on business ventures that replace your job). They come in all shapes and sizes from ride-sharing(examples Uber and Lyft) to home-sharing(examples AirBnB and VRBO) to getting a handyman to do chores around the house(example: Takl).
Did you that there’s even one where you can make extra money renting out your personal vehicle? It’s called Turo and I know it very well as I used it to rent my dream car, a Porsche 911 C2S:
Much like my favorite car company Porsche, the economy itself, is evolving(Read: Formula E: Porsche to enter team in 2019, ending Le Mans involvement). Now I know some will say “but hasn’t the 911 had the same exterior design for over 50yrs?” And yes, you would be correct. The 911 is the embodiment of what your mom used to always say “beauty is on the inside” and Porsche engineers have made thousands of improvements on the driving experience over the years that your average Joe won’t see and won’t believe until you actually drive one.
This leads me back to the topic at hand “experience”. It seems with this shared economy anyone with a smart-phone or a computer can sell an experience. Whether it’s a room to stay on a long trip through California(I did this recently), a ride to the airport(also did recently) or as evidenced above, a thrill ride in a dream car.
With all of this though there’s that dreaded consequence – TAXES.
All of this IS income and don’t fool yourself into thinking otherwise! Even worse so it’s that awful type of income that is paid on the dreaded Form 1099 Misc where none of your taxes are withheld(vs. your employer who is nice enough to pay half of your FICA taxes and with-holds the rest as well as allows you to with-hold state and federal income taxes as well).
In addition since most payment is done by credit / debit nowadays if you have your own account like Square Register, Paypal or a bank merchant account you will get a 1099-K form for all of those transactions. (Don’t forget that any cash received is also reportable, you don’t want to be like Nick’s Roast Beef, a staple in the Boston area and example of a successful “mom and pop” that was targeted by the big, bad IRS because they thought cash was not reportable and had to go through an expensive and stressful audit which included an indictment on 17 federal crimes!)
Some feel a 1099 is preferred as you can quote “deduct everything”, but WARNING – YOU CAN’T! Please don’t make the mistake of listening to what your friend who rents his house out on AirBnB, drives for Lyft, rents his second car on Turo and does household chores on Takl does because he supposedly pays no taxes as this poses the obvious question: “Where will he be when you get audited?”
Additionally, to that “CPA”(a loose term in the “shared economy” that seems to be what everyone uses for their “tax preparer” when in reality it’s a specific term for an actual license granted at the state level to accountants who meet specific requirements and NOT all tax preparers are CPAs, then again, not all CPAs do taxes either) who says “don’t worry, you can deduct all of this” please do yourself a favor and RUN: Far and Fast! Back to good old mom, “if it’s too good to be true, it probably is!”
Being paid on a 1099 for sharing your home, giving someone a ride, doing a chore around the house or even renting out your car is just like any other business – some items are deductible and some aren’t. To truly know what is you need the help of a tax professional.
I hope you enjoyed this article or were at least informed, either way please share your opinion in the comments section below.
Finally, if you are benefiting from the shared economy and want to know how it affects your taxes, even if you’re only doing it on the side of a well-paying W2 day job please call us at 623-240-9545 or email at firstname.lastname@example.org and we’ll make sure you stay ahead of the game in the new economy!