How America’s Outdated Tax Code Fails Gig Economy Workers

Welcome to the tax code…

The American tax code is like a deep dark jungle at dusk. It’s scary. It’s confusing. Peril lurks everywhere. And if one ventures in without proper preparation one can end up in a bad situation.

This is doubly true for “gig economy” workers.

It must be noted that our tax code needn’t be like this. It shouldn’t be. But the more confusing the code the more money there is to be made by an accounting industry that revels in the complexity. (Just one of the crony factors in the tax code problem.)

(From Reason)

Tax reform could be the centerpiece of Congress’ fall agenda. While most of the discussion will focus on top marginal rates and the promises of faster economic growth or reduced inequality, a less-noticed but crucial part of the discussion will involve changing the tax code to match the needs of an economy that includes more independent contractors and freelancers, thanks to the rapid growth of gig economy platforms in recent years.

The current federal tax code puts those workers at a disadvantage in several ways. Ambiguity in the tax code has led to different interpretations about IRS reporting standards for workers earning money through gig economy platforms. Even though the current tax code contains loopholes that exempt potentially tens of thousands of dollars of income from some part-time independent contractors, navigating it can be complicated and costly for workers who use Uber or Etsy to earn a relatively small amount of extra income. Taken together, these problems can leave sharing economy workers with huge tax bills, potentially forcing them to seek expensive professional tax help, while simultaneously hampering the federal government’s ability to collect tax revenue…

…Tax reform could be the centerpiece of Congress’ fall agenda. While most of the discussion will focus on top marginal rates and the promises of faster economic growth or reduced inequality, a less-noticed but crucial part of the discussion will involve changing the tax code to match the needs of an economy that includes more independent contractors and freelancers, thanks to the rapid growth of gig economy platforms in recent years.

The current federal tax code puts those workers at a disadvantage in several ways. Ambiguity in the tax code has led to different interpretations about IRS reporting standards for workers earning money through gig economy platforms. Even though the current tax code contains loopholes that exempt potentially tens of thousands of dollars of income from some part-time independent contractors, navigating it can be complicated and costly for workers who use Uber or Etsy to earn a relatively small amount of extra income. Taken together, these problems can leave sharing economy workers with huge tax bills, potentially forcing them to seek expensive professional tax help, while simultaneously hampering the federal government’s ability to collect tax revenue.

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