If you drive for DoorDash, rent out a spare room, or sell handmade goods online, the way you report that income is shifting in ways that could shrink your refund.
A phased-in IRS rule is pushing more platforms to issue a Form 1099-K, the document that reports payments processed through apps like Venmo, PayPal, Etsy, and Uber.
The change has been a slow-motion train wreck for taxpayers.
Congress originally wanted a $600 threshold, then delayed it repeatedly.
For the 2024 tax year, the IRS set the trigger at $5,000 in gross payments — down from $20,000 and 200 transactions under the old standard.
The threshold is scheduled to drop to $2,500 for 2025 and $600 after that unless lawmakers intervene again.
A 1099-K reports gross payments, not profit.
If a friend sends you $700 for rent and labels it "goods and services," that money can land on the form even though it isn't taxable income.
Suddenly you're explaining to the IRS why your side hustle looks bigger than it is.
Gig drivers face a related squeeze: mileage.
The standard mileage rate for 2024 was 67 cents per mile, and every business mile you log cuts your taxable income.
Skip the tracking and you forfeit one of the largest deductions available.
Apps like Stride and Everlance log trips automatically, and a simple spreadsheet beats nothing.
Employees have taxes withheld from each paycheck.
If you owe $1,000 or more for the year, the IRS expects estimated payments four times a year, and missing them triggers penalties.
Many gig workers discover this in April when a $3,000 bill lands with no money set aside.
You pay both the employee and employer halves of Social Security and Medicare — 15.3% on net earnings, though half is deductible.
That's on top of federal income tax and any state tax.
The fix isn't complicated, just unglamorous.
Set aside 25% to 30% of every payout in a separate savings account.
Track every deductible expense: phone bills, car maintenance, supplies, home office space, and the platform's service fees.
If you received a 1099-K that includes personal payments, you can request a corrected form from the issuer.
If they won't budge, report the amount on your return and subtract the non-taxable portion on the appropriate line, with a clear explanation.
TurboTax and H&R Block both walk through this, and a CPA is worth the fee if your numbers are messy.
The IRS Free File program covers some gig situations, and IRS Direct File has expanded to more states.
VITA sites offer free help for households under certain income limits.
What to watch: whether Congress raises the $600 threshold before it takes effect.
Two bipartisan bills have floated $5,000 as a permanent floor, but neither has passed.
Until then, assume the lower number is coming and budget like it's already here.
The gig economy sold workers on freedom and flexibility.
The tax code, unfortunately, did not get the memo.
Final Thoughts
Treat every payout as 70% yours and 30% Uncle Sam's, and April stops being a crisis.