According to a new survey by DaVinci Payments, the gig economy grew by 33% in 2020 and experts predict that it will only continue to grow in 2021 as people working to recover from the pandemic are finding new ways to supplement their incomes. However, while it’s easy to become a gig worker through apps like Lyft or Postmates, there are challenges to be aware of, too. Here are a few ways new gig workers set themselves up for success during the pandemic.
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You’re a small business to the IRS
One thing that often comes as a surprise to new gig workers is that as an independent contractor your taxes aren’t withdrawn from the money you make like they are as a W-2 employee. This means that come tax time, you’re responsible for calculating and paying the taxes you owe, so it’s important to set aside a portion of your income to prepare for future payments. As a rule of thumb, plan to estimate and pay quarterly taxes to avoid a penalty from the IRS. If you’re unsure One benefit of being considered a small business is that there are multiple tax deductions you can take advantage of that W-2 employees can’t. And with tax deductions comes documentation.
Expense tracking is a must
You’ll incur expenses as gig workers, but you also may be able to deduct some of them, too. However, to make a deduction you need to keep a through record of your expenses like gas by using a tracking software like QuickBooks. Many popular gig jobs like InstaCart or Lyft require that you drive a lot and the miles you drive for business can be a valuable deduction. Apps like MileIQ are great for keeping a detailed mileage log or you can always write it down or use an excel spreadsheet. Staying on top of documentation will not only help filing your taxes easy, but you’ll also be prepared in the case of an audit.
Insurance can be complicated
You many think that if you have car insurance, you’re all set to work your new gig job, but that’s not the case. If you’re transporting food or people, you’ll need to check in with your personal car insurance to see what they cover while you’re on the job. If they don’t cover incidents, you’ll need to secure a form of insurance like Rideshare to make sure you’re covered. Ridesharing companies do offer minimal insurance coverage, but full coverage doesn’t kick in until you’ve accepted a ride request. Rideshare insurance is offered through many major providers and helps cover accidents that happen in the downtime between passengers. Sites like Answer Financial can help you find the best rates for the insurance you need. Regardless of the coverage you choose, always update your insurance company to let them know you’re driving your car for money or they may cancel your policy altogether.
There are resources to help you
Gig work and the extra work that comes with it can be confusing and overwhelming, but there are resources available to help you along the way. Consider finding a reputable association near you that offers a variety of benefits. A good association will offer educational resources like Big Results Academy or Social Core Marketing and discounted solutions on health insurance, financial services, legal services and more. Networking is another important aspect of becoming a successful gig worker, so find an association that has active forums or access to networking platforms like BeeKonnected to give you a leg up.
Gig work is a great solution for many people as you can choose when and where you want to work when it’s convenient for you. If you join the growing gig economy, make sure you’re doing it in a way that sets you up for success.
Charles Jackson is a published author and has consulted with a variety of small business ventures. As president of the Association for Entrepreneurship USA, Charles and his team serves, supports, represents and promotes the discipline of entrepreneurship for those have, or wish for the freedom of successfully driving their own business. For more information on AFEUSA or entrepreneurship, email Charles at email@example.com or visit afeusa.org.