Uber, Lyft, Airbnb, Etsy, Rover, TaskRabbit. If you have used any of these services–or provided services so they can others–you’re part of the sharing economy.

In case you have only used these types of services (and never provided them), plus there is you don’t need to worry about the tax implications but when you’ve rented out an extra room in your house through a company like Uber or Airbnb then you’re probably collecting a fee–a percentage of which works to the provider (within this example, Airbnb) plus a portion that you keep for providing the service. But be it your full-time gig or even a part-time job to create additional cash, you need to be conscious of the tax consequences.

Millennials will be the number one people that use sharing economy but Gen X and Boomers utilize it too; and a recent PWC study discovered that 24 percent of boomers, age 55 and older, may also be providers. Although people are looking to earn a little bit of more income, some dive in it full-time hoping they could earn a living, and still, others simply enjoy meeting new people or providing a service that assists people. What Business liability insurance don’t get are these claims extra cash could impact their taxable income–especially should they have a full-time job within a company.

Quite simply, that extra income might become a tax liability once you find out your tax bill. To prevent surprises at tax time, it’s more important than in the past to become proactive understand the tax implications of your new sharing economy gig and seek the advice of a reliable tax professional.

Tip: If you have work within a company be sure that your withholding reflects any other income derived from your side gig (e.g. boarding pets at your house through Rover or driving to get a ride-share company like Uber on weekends). Use Form W-4, Employee’s Withholding Allowance Certificate, to make any adjustments and send it in to your employer who’ll utilize it to figure the amount of federal tax to become withheld from pay.
New Business Owner
As you might not necessarily consider yourself like a newly self-employed company owner, the IRS does. So, while you work through a business like Airbnb or Rover, you might be considered a business owner and so are in charge of your own personal taxes (including paying estimated taxes if you wish to). The choice is yours to help keep a record of income and expenses–and of course, to keep good records that substantiate your revenue and expenses (more about this below).

Note:Should you receive income from your sharing economy activity, it’s generally taxable although you may don’t get a Form 1099-MISC, Miscellaneous Income, Form 1099-K, Payment Card and Alternative party Network Transactions, Form W-2, Wage and Tax Statement, or some other income statement.

And now, for that very good news. Being a company owner, you’re entitled to certain deductions (subject to special rules and limits) that you can’t take as an employee. Deductions decrease the amount of rental income that is susceptible to tax. You can also be able to deduct expenses directly related to enhancements made exclusively for the comfort of your guests. For instance, should you rent out an area in your apartment through Airbnb, amounts you spend on drapes and window treatments, linens, or perhaps a bed, could be deductible.

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