If you drove for Uber, delivered for DoorDash, or sold crafts on Etsy last year, your tax situation just got more complicated.
A growing number of gig workers are discovering that the money they set aside for taxes isn't covering what they owe, and the gap is widening.
The core problem hasn't changed: gig platforms classify workers as independent contractors, not employees.
That means no employer withholding, no partial payroll tax match, and no one automatically setting money aside for Uncle Sam.
Workers get the full check upfront and the full tax bill later.
Roughly 1 in 4 American adults now earns some income through gig work, according to recent survey data.
As that number climbs, so does the volume of tax surprises hitting households that never budgeted for them.
The self-employment tax is the biggest shock for most newcomers.
It runs 15.3 percent on net earnings, covering both the employee and employer halves of Social Security and Medicare.
That's on top of regular federal income tax, and in many states, state income tax too.
Anyone earning $600 or more from a single platform should expect a 1099-NEC or 1099-K form.
Some workers assume that because they never received a form, the income doesn't count.
The IRS expects all income reported, whether or not a form shows up in the mailbox.
Drivers often hear they can write off 67 cents per mile, but that only applies to business miles.
Commuting from home to a delivery zone generally doesn't qualify.
Tracking every trip properly, not estimating at year end, is what keeps an audit from turning ugly.
The good news is that the tax code offers real relief for people who plan.
The qualified business income deduction can trim up to 20 percent off taxable earnings for eligible workers.
Retirement contributions through a SEP IRA or solo 401(k) reduce taxable income and build a cushion for slow months.
The bad news is that most gig workers don't use any of it.
Fewer than half set aside money for quarterly estimated payments, which means penalties and interest pile on top of the original bill.
For anyone staring down a balance they can't pay, the IRS does offer installment plans.
But interest keeps accruing, and ignoring the notice is the one move that reliably makes things worse.
State tax agencies tend to be less forgiving than the federal government.
The simplest fix is boring but effective: move 25 to 30 percent of every gig payment into a separate savings account the moment it lands.
By April, the bill becomes a transfer instead of a crisis.
Our take: gig work sells freedom, but the tax code treats it like a small business, and too many workers only learn that in April.
A separate savings account and a mileage app cost almost nothing and prevent the worst of it.
Final Thoughts
The platforms won't do this for you, so the sooner you build the habit, the less this hurts next year.