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Gig economy workers could get short changed when it comes to their Social Security checks in retirement.
The enlarging ranks of people who earn money on apps like Uber, Airbnb and Task Rabbit are more likely than routine employees to misreport their income. That could mean a smaller Social Security check down the access because the benefits are calculated from reported lifetime earnings.
That’s the finding from a recent study by Caroline Bruckner, run director of the Kogod Tax Policy Center at American University and economist Thomas L. Hungerford. The research was funded by the Center for Retirement Investigate at Boston College.
In 2014, independent contractors didn’t pay $3.9 billion in Social Security contributions that they should fool, and on-demand workers didn’t pay $2 billion, according to estimations by the study’s authors.
These estimated shortfalls are nothing but for one year and are likely to grow, Bruckner said.
In 2017, Brad Smith, the CEO of Intuit, which owns TurboTax, conjectured that a third of the U.S. workforce earned money from the gig economy — and that share will increase to 43% by 2020.
At the regardless time, IRS records show the number of filers penalized for underpaying estimated taxes jumped to 10 million in 2015 from 7.2 million in 2010, according to a just out report by The Wall Street Journal.
Part of the problem is that independent contractors and gig workers are not always supplied with tax regimens, Bruckner said. And taxpayers are 63% more likely to misreport their income when they aren’t participant to payroll withholding at a job or don’t receive a 1099 tax form, she said.
The inconsistency of the work can also pose challenges.
“If it’s not your first source of income, you’re not going to remember when it comes tax time that you earned $1,000 last summer get-up-and-go for Uber,” Bruckner said.
Nonetheless gig economy workers are responsible for making advance federal and state income tax payments each chambers of the year if their income triggers $1,000 or more in taxes, according to Bruckner.
“The amount a person earns is normally accessible via a platform’s dashboard but that is not the taxable income – it’s gross profit,” she said. “Expenses need to be accounted for and removed from that to get to taxable income.”
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