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Gig economics workers can be changed briefly when it comes to their social security checks on retirement.
The growing ranks of people making money on apps like Uber, Airbnb and Task Rabbit are more likely than traditional employees to incorrectly report their income. This could mean a lower Social Security check in the future because the benefits are calculated from the earnings reported over a lifetime.
This is the conclusion of a recent study by Caroline Bruckner, managing director of the Kogod Tax Policy Center at American University and economist Thomas L. Hungerford. The research was funded by the Center for Retirement Research at Boston College.
By 2014, independent contractors did not pay $ 3.9 billion in Social Security contributions they should have, and workers on demand did not pay $ 2 billion, according to estimates by the study's authors.
These estimated deficits are only one year old and are likely to grow, Bruckner said.
In 2017, Brad Smith, CEO of Intuit, which owns TurboTax, estimated that one-third of the US workforce made money from the gig economy – and that share will increase to 43 percent by 2020.
At the same time, IRS filings show that the number of tax-punished filers paid below expectations has jumped to 10 million in 2015 from 7.2 million in 2010, according to a recent report by The Wall Street Journal.
Part of the problem is that independent contractors and concertgoers do not always get tax forms, Bruckner said. And taxpayers are 63% more likely to misrepresent their income when they are not subject to withholding on a payroll at a job or do not receive a 1099 tax form, she said.
The inconsistency of work can also pose challenges.
"If it's not your main source of income, you will not remember when tax time comes that you earned $ 1,000 last summer driving to Uber," Bruckner said.
However, gig economy workers are responsible for making advanced federal and state tax payments every quarter of the year if their income triggers $ 1,000 or more in taxes, according to Bruckner.
"The amount a person earns is usually accessible through the dashboard of a platform, but that's not the taxable income – it's gross profit," she said. "Expenses need to be accounted for and deducted from that to arrive at taxable profit."
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