Gig work can be an effective way to make some extra cash, but you also need to be prepared to file taxes on that income. Gig workers should receive a Form 1099—usually a 1099-NEC (non-employee compensation), 1099-K (payments received through a third party processor like Stripe or Cash App), or a 1099-MISC (any other income that doesn’t fall into a specific category).
Even if you don’t hit the threshold to receive a 1099, you still need to report the income on your tax return using Schedule C for self-employment income.
Keep Accurate Records to Claim Expenses
The best way to reduce your tax liability as a gig worker is to maximize the deductions you take on your Schedule C. Self-employed taxpayers can claim the cost of health insurance premiums, phone or Internet bills (if used for business purposes), office supplies, marketing costs, and business mileage (among other expenses, but those are the highlights).
Mileage is one of the most important things to keep accurate track of as a gig worker. Deliveries, ride-shares, or even driving to a client’s home to clean or babysit—all of it is business mileage and this deduction adds up fast.
The 2025 mileage rate is $0.70 per mile, so the more you drive, the larger your deduction.
To track your mileage, you can use an app on your phone that allows you to start and stop trips related to your gig work. There are lots of apps like this for both iOS and Android phones, such as MileIQ, Everlance, and TripLog. Each has a free version with limited features and a fairly low-cost premium plan that provides more automation and efficiency. Plus, the cost of this app is also a business deduction!
If an app isn’t your style, you can also keep a physical list in a notebook or a spreadsheet. No matter what method you choose, it’s crucial to track every time you drive your vehicle for business purposes so you can back up your claims for the deduction.
Use a Business Checking Account
When your personal and business finances mingle, things get messy. Avoid confusion and red flags for audits by setting up a separate checking account. Your local bank can help you do this, or you can sign up for an online business checking account like Found which also helps estimate your quarterly taxes and allows you to categorize expenses for easy reporting at tax time.
If you receive payments through third party processors like Stripe, PayPal, CashApp, Venmo, or Zelle, it’s a good idea to create secondary accounts for business income instead of mingling your gig payments with your personal funds.
Pay Estimated Tax
If you expect to owe $1,000 or more in taxes, you must make quarterly estimated payments. Your tax professional can help you determine the amount to pay, and it’s simple to make your payments on the IRS website. Roughly speaking, you’ll want to set aside about 25-30% of your net income for taxes.
Is it Time to Hire a Pro?
Taxpayers often start working with a professional tax preparer once their income taxes get more complicated. It’s certainly possible to do your Schedule C on your own, but the best way to make sure you’ve explored every possible deduction is to work with a pro.
Tree City Tax Service can help! We do taxes for sole proprietors and contractors, including year-round tax advising to help strategize during the year so you owe less at tax time. Schedule a complimentary consultation today.