Filing Taxes as a Part-Time vs. Full-Time Gig Worker: Key Differences

Filing Taxes as a Part-Time vs. Full-Time Gig Worker: Key Differences

The gig economy offers incredible flexibility, allowing individuals to work as much or as little as they like. Whether you’re a full-time gig worker relying on platforms like Uber, DoorDash, or Upwork, or a part-time worker using these platforms to supplement your income, tax season comes with unique challenges and requirements. Understanding the key differences between filing taxes as a part-time and full-time gig worker is crucial for staying compliant and maximizing your deductions.

Defining Part-Time and Full-Time Gig Work

• Part-Time Gig Worker: An individual who does gig jobs as a supplement to another regular job or other sources of income. This is typically done for supplemental income or as a side hustle.
• Full-Time Gig Worker: An individual who depends solely or primarily on gig work as the primary source of their income. These workers might engage in multiple gigs to sustain their livelihood.

Although both types are classified as self-employment for tax purposes, there are differences in how income, deductions, and reporting apply.

Key Differences in Tax Filing

1. Income Reporting

Part-Time Workers: Income from gig work is supplemental. You'll typically receive a Form 1099-NEC or 1099-K if your earnings meet IRS thresholds. However, even if you don't receive a form, all gig income must be reported.

Full-Time Workers: Gig work is your primary income, so you’ll likely receive multiple 1099 forms. It’s essential to track income from all platforms and jobs to ensure accurate reporting.

2. Self-Employment Tax

Both part-time and full-time gig workers are subject to self-employment tax, which covers Social Security and Medicare contributions. This tax is 15.3% of your net earnings after deductions.

For part-time workers, self-employment tax only applies to gig income. If you have a W-2 job, the Social Security and Medicare from that job does not overlap with gig work.

For full-time workers, self-employment tax is applied to all income as gig work is their source of earnings.

3. Deductions and Expenses

Part-Time Workers: Deductions may be smaller, as gig work is not your primary activity. Some common deductions include mileage, equipment, and a part of phone or internet bills used for gig tasks.

Full-Time Workers: The opportunity for deductions is greater since gig work involves more activity. Expenses like vehicle maintenance, insurance, professional services, and even home office can be deducted as long as they are directed to your gig work.

4. Quarterly Estimated Taxes

Part-Time Workers: If your gig income is low and you have another job that takes taxes off, you will not pay quarterly. Nonetheless, calculate your total tax liability so that you will not get underpayment penalties.

Full-Time Workers: As a full-time gig worker, you are liable for paying estimated quarterly taxes. This means you pay both self-employment and income taxes through the year.

5. Tax Credits and Benefits

Part-time workers can also take advantage of a variety of traditional employer fringe benefits, including retirement savings plans or health insurance that would otherwise reduce their taxable income.

Full-time gig workers can deduct self-employed health insurance premiums and may contribute to a SEP IRA or solo 401(k) for retirement savings, all of which lower taxable income.

Common Issues For Both

1. Record Keeping  

Both part-time and full-time gig workers should keep detailed accounts of their income and expenses. Use apps or spreadsheets to track mileage, receipts, and any costs directly relating to your gig work.

2. Tax Threshold:

The IRS recently revised Form 1099-K's reporting requirements. You'll be receiving a 1099-K if you have any one platform paying you more than $600 in a given year. Make sure you report all your income-earning activities, even without a form.

3. How to File Deductions

It can be tough figuring out which deductions qualify for you. A part-time worker might forget to mention mileage, whereas a full-time worker might miss including some business-related expense such as the depreciation of equipment.

4. Cash Flow Management for Taxes

Taxes on self-employment can be a shock, especially if you are not prepared. Preparing for taxes by saving 20-30% of your income will avoid surprises at tax time.

Pro Tips for Filing Taxes as a Gig Worker  

Separate Your Finances: Use a dedicated bank account or credit card for gig-related income and expenses to simplify tracking.

Leverage Tax Software or Professionals: Tax software can calculate deductions and prepare filings, but a professional can provide personalized advice and ensure accuracy, especially for full-time gig workers.

Keep Organized Throughout the Year: Avoid last-minute stress by keeping records updated monthly. Store receipts digitally for easy access.

Understand Tax Deadlines: Mark key dates for quarterly estimated taxes and annual filings to avoid penalties.

Seek professional guidance: Service providers such as WBB Gig Taxes may lead you through the labyrinth of gig work taxes, help you in being compliant and receiving maximum refund.