The 1099-K threshold changed again for 2024, and a lot of gig workers are about to find out the hard way that nobody was withholding money on their behalf.
If you drove for Uber, delivered for DoorDash, rented a spare room, or sold handmade goods online last year, you may owe federal income tax plus a 15.3% self-employment tax on that income.
Unlike a regular paycheck, no employer took money out along the way.
Companies only send a 1099-K once you cross a reporting threshold, but your tax obligation doesn't start there — it starts at $400 of net self-employment income.
If you made $3,000 doing rideshare on weekends and never got a form, the IRS still expects its cut, and you're responsible for reporting it.
Here's the good news: a lot of your costs are deductible.
Mileage is the big one — the IRS standard rate for 2024 was 67 cents per mile, and it adds up fast.
Phone bills, delivery bags, parking, and a portion of your home internet can count too.
Drivers who track mileage carefully often cut their taxable profit by thousands.
The trap is that many gig workers treat their gross earnings as income.
If you earned $20,000 on a delivery app but drove 15,000 miles, that mileage deduction alone can knock thousands off what you actually owe.
Skip the tracking and you're paying tax on money you already spent on gas and repairs.
Quarterly payments trip up first-timers every year.
The IRS wants estimated tax payments four times a year once you're self-employed, and skipping them can trigger an underpayment penalty.
A simple fix: set aside 25% to 30% of every gig payout in a separate savings account so the money is waiting when the bill comes.
Gather your 1099s plus your own records, since one company may not capture all your income.
Add up your mileage and expenses before you file.
If your side hustle is small and new, software like FreeTaxUSA or the IRS Free File program can handle it cheaply.
And if you owe more than you can pay, the IRS offers installment plans — ignoring the letter is the worst option because penalties compound.
Even if you owe nothing federally, several states tax gig income, and some cities add their own fees.
Rideshare drivers in particular may face local licensing rules on top of income tax.
The bottom line is that gig work pays you like a business, so you have to budget like one.
Track miles, stash a slice of every deposit, and set a reminder for those quarterly deadlines.
Opinion: The gig economy sold millions of Americans on flexibility, then handed them a tax bill with no instructions.
Final Thoughts
The fix isn't complicated, but it does require treating a side hustle like a real small business — and that starts with knowing what you actually earned.