Tax compliance in the ever-growing sharing or gig economy is lagging. As freelance service gigs from online sites such as Uber, TaskRabbit, Rover, GrubHub, and Urban Sitter expand, a significant number of taxpayers who get paid for these services are unaware of their tax obligations. They don’t see themselves as engaged in business and may be unaware of their independent contractor status. They fail to make quarterly estimated payment taxes or pay self-employment tax. IRS is trying to raise public awareness in this area. A page on its website is devoted to helping people who get paid for their activities in the sharing economy. But the agency could do better, according to IRS’s National Taxpayer Advocate. Nina Olson recommends that IRS develop a publication targeted to freelancers in the sharing economy and create a web tool to help users understand the tax rules. The House’s IRS budget bill for 2019 would require IRS to deliver a report to Congress detailing the agency’s plan to hike tax compliance by self-employed individuals.

A Senate proposal from last year would help somewhat with compliance. It would make big changes to the Form 1099 reporting rules. Under present law, the 1099-MISC is required when annual payments to a non-employee exceed $600.. Third-party networks must send a 1099-K to payees who have over 200 transactions and were paid more than $20,000. Compliance with these rules all over the place. The bill would have third-party networks in the gig economy use the 1099-K, while payers in traditional independent contractor relationships would file the MISC. Payments exceeding $1,000 in a year would be reported on the 1099-K or 1099-MISC. The proposal, which is backed by Olson, was left out of last year’s tax legislation. But we expect Congress will eventually give it another look. It’s just a matter of time.