If you became a gig worker during the pandemic, beware: Your taxes just got more complicated.
Gig work – Uber driving, Instacart shopping, Amazon Flex delivery and so on – is on-demand, freelance work that’s typically taxed as self-employment. Instead of having an employer withhold money from your paycheck, you’re an independent contractor who is expected to pay taxes on your gig income as you earn it. You’ll also owe a larger share of your pay to Social Security and Medicare taxes.
On the plus side, you may have more opportunities to deduct your expenses and save for retirement than you do as a W-2 employee.
Self-employment taxes
About half of U.S. adults say they don’t have a good understanding of the tax implications of freelance or gig work, according to a recent NerdWallet survey. Yet this type of work was a growing part of the U.S. economy even before the pandemic upended people’s work lives.