Millennial Cash: three issues to know when you’re new to gig work

Shutdowns, layoffs, and pay cuts caused by the coronavirus pandemic have left millions of Americans looking for new sources of income. Those who have recently turned to gig work may be weeks away from financial surprise in the form of unexpected tax bills and insurance coverage fine print.

“These are the top two things most new business owners overlook,” says Chris Russell, a San Diego-based certified financial planner who specializes in business owners and the self-employed.

Don’t you consider yourself a small business owner? Well, let’s start there.

For the IRS, you’re a small business

Sure, you only do grocery deliveries. But that simple act makes you a small business in the eyes of the IRS. And that opinion is the only one that matters when it comes to taxes.

“Basically, you are considered an independent contractor,” said Garrett Watson, a senior policy analyst at the Tax Foundation, a nonprofit. “You don’t have to do anything super complicated. You don’t have to integrate or do something like that.”

But you have to pay taxes on any money you make gig work. This fact is often an undesirable and expensive surprise to new gig workers. As an employee, income and wage taxes are automatically withheld from your paycheck. That’s not the case with gig workers, says Russell.

“There is no tax deducted on the money you make as a business owner,” Russell says. “That means you will likely owe the IRS a lot of money for filing your returns.”

A good rule of thumb: for every dollar you make gig work, save 30% for income and income Taxes on self-employment. In the future, plan to estimate and pay these taxes quarterly to avoid penalties from the IRS.

And if you think, “I haven’t made a lot. I won’t report it. How does the IRS know?” Do not do it. It will know.


Gig work isn’t all money in the bank. They also generate costs. Keep these in mind as you can probably subtract some of them and cut the tax burden we talked about a second ago.

“Keep good and honest records to get any allowances due to you,” said Ryan Greiser, a certified financial planner based in Doylestown, Pennsylvania.

Apps like Stride, Hurdlr and MileIQ automatically track your mileage and expenses for free or for a small fee to help you calculate taxes. Depending on your situation, Greiser says it might be worth exploring QuickBooks.

“It’s a small investment tracking expenses, estimating your quarterly taxes, keeping track of your mileage, and paying your quarterly taxes online,” says Greiser.

You’ll also want to explore the nuances that may and may not be deducted depending on your gig work, says Watson, pointing to Ride Hail Services as an example.

For example, let’s say you drop a passenger off and drive around town to find your next ride, he says. Can you deduct the cost of gasoline used between trips? (You can the IRS Gig Economy Control Center is a good place to find answers to your questions.


The IRS isn’t the only agency that needs to know about your new sources of income. Your insurance agent must also be informed. Failure to disclose your work can in some cases exclude you from your policy. Additionally, your insurance agent can help you understand what aspects of your gig work are covered.

Transporting food or people? You need to know if your personal car insurance covers incidents while you’re on the job (probably not.) Carpooling or commercial auto insurance could fill the gaps.

While the platform you are working on may have a business policy covering you, it will only be activated in certain circumstances. It is important to know the details of this coverage.

Uber and Lyft offer commercial coverage for drivers, but this only applies if you have passengers in the car or are on your way to pick up a passenger after taking a ride. DoorDash only offers liability insurance and only if there is groceries in your car. Grubhub and Instacart do not provide commercial coverage for delivery drivers on their platforms.


This column was provided to The Associated Press by the personal finance website NerdWallet. Kelsey Sheehy is a writer at NerdWallet.


NerdWallet: Self Employment Tax – Understand & Calculate It in 2020,

IRS Gig Economy Tax Center: