Millions of Americans picked up delivery and rideshare work in the past few years, and many are about to find out that the IRS treats them very differently from a regular employee.
There's no boss withholding money from each paycheck.
There's no employer paying half your Social Security and Medicare.
Employees split payroll taxes with their employer — you pay 7.65%, the company pays the other 7.65%.
As a gig worker, you're both sides of that equation.
That's 15.3% on your net earnings right off the top, before federal income tax even enters the picture.
Then there's the quarterly payment system.
The IRS expects estimated taxes four times a year — roughly April, June, September, and January.
Skip those, and you're not just facing a lump sum in April.
You're facing an underpayment penalty on top of it.
Plenty of first-year drivers and shoppers learn this the hard way when a $3,000 tax bill shows up in spring.
The good news is that a lot of gig workers overpay, not underpay, because they never track their expenses.
Every mile driven for work, every phone mount, every insulated delivery bag, every hot bag replacement — those are potentially deductible.
The standard mileage rate for 2024 sits at 67 cents per mile, and that adds up fast for someone logging 500 miles a week.
But here's the catch that trips people up: you can't deduct both the mileage rate and actual car expenses like gas, repairs, and insurance.
And if you take the standard mileage rate in year one, you generally have to stick with it in later years.
There's also the self-employment tax deduction, which lets you write off half of that 15.3% — a small mercy, but a real one.
And the Qualified Business Income deduction can shave up to 20% off qualifying income for some workers, though the rules get complicated depending on your total earnings and filing status.
The IRS doesn't accept a vague estimate of "I drove a lot." If you get audited and can't produce a mileage log, those deductions can vanish.
Apps exist to track this automatically, and they cost far less than the taxes you'd owe without them.
One more thing worth watching: some gig platforms have started issuing 1099 forms that include tips and base pay but not necessarily the full picture of what you earned across multiple apps.
If you work for three different services, nobody sends you a combined total.
Gig work isn't a scam, but the tax setup is genuinely stacked against people who treat it casually.
The workers who come out ahead are the ones who set aside roughly 25% to 30% of every payout, track their miles from day one, and pay quarterly instead of pretending the deadline doesn't exist.
Final Thoughts
If you're new to this, spend an hour with a tax professional before April — it's cheaper than the penalty.