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Tax Talk: Gig earners must estimate tax witholdings | Business

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Q. As an Uber driver, I became part of the “gig” economy in 2019. An Uber veteran asked me if I had made any estimated income tax payments. She followed her question with a strong statement indicating these payments are required if penalty and interest were to be avoided. Please help me understand estimated income tax payments.

A. Many people earn money and have no income taxes withheld. “Gig” earners like yourself are self-employed along with a wide array of other folks who operate their own businesses, sole proprietorships or partnerships. Since income tax officials have seen the movie “Jerry Maguire,” they want you to “SHOW (or send) ME THE MONEY!”

Both federal and state governments have estimated income tax payment mandates that require taxpayers to predict their likely tax liability and make estimated payments on April 15, June 15, Sept. 15 and Jan. 15. Thus the next estimated tax payment for 2019 is due Wednesday.

Because of the peaks and valleys of earnings, the payments represent a taxpayer’s “guestimate” of what is owed. A “safe harbor” rule enables a taxpayer to avoid both penalty and interest. Succinctly, the “safe harbor” provides protection to a taxpayer if estimated payments add up to 90% of the tax shown on the individual’s current year Form 1040 or 100% of the tax reported on the prior year’s return.

We highly recommend you make a payment on or before Jan. 15 since the penalty provisions can be somewhat Draconian and the interest rates on underpayment of estimated taxes can fluctuate between 5% and 6% depending on the prime rate and other criteria.

Other taxpayers subject to the estimated tax payment rules include people who receive substantial dividends, interest and/or royalty income; report significant capital gains; or withdraw a Required Minimum Distribution (RMD) from their IRA or other pension plans. More details on estimated tax payments are available in IRS Publication 505-Tax Withholding and Estimated Tax.

Q. I was wondering about capital gains and losses when selling a vacation home. We purchased a Florida condo in 2005 and sold it at a huge loss in 2019. Can we recoup any of the loss through a tax credit or deduction? There was no mortgage involved.

A. The rules on capital gains and losses have more twists and turns than a Cirque du Soleil performance. We’ll cover the parts that apply to your case.

The IRS classifies your Florida vacation home as “personal use” property. That means if you have a gain when you sell, you can treat it (usually) as a capital gain. That’s the good news, since capital gains rates are normally lower than the rates on ordinary income.

The bad news is that a loss on personal use property is not deductible, nor does it qualify for any special tax breaks or credits. It’s one of those Maalox moments that often encourage taxpayers to seek professional counseling. We should add that things would be different if there were at least a partial-business-use component to the Florida property, such as renting to tenants, or conducting some type of commercial activity in or on the property.

Computing the amount of allowable loss could be a challenge. It would include the length of time you owned the property, the amount of depreciation taken before the sale, the percent of business use as opposed to personal use, and several other potentially mind-numbing factors.

Ken Milani is a Professor of Accountancy at the University of Notre Dame. His email is milani.1@nd.edu. Claude Renshaw, an Emeritus Professor of Business Administration at Saint Mary’s College, can be reached at renshaw1040@gmail.com. Email either to submit a question.

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Gig economy saves Australia’s jobs market, but at what cost?

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Don’t be surprised if employers use the recession to employ more casuals and outsource more work.

(Image: Adobe)

There were three messages in the confusing jobs data for August that emerged yesterday from the Australian Bureau of Statistics. The headline number was dramatically better than any economist, or even the Reserve Bank or Treasury, had predicted.

The first is, despite the claims from the media and the Morrison government that the Andrews government’s lockdown was some profound act of economic vandalism, Victoria’s jobless rate only moved up to 7.1% from 6.8%, with 42,000 jobs lost in that state last month. Hours fell by 4.8% in Victoria, compared with a 1.8% rise across the rest of Australia.

Now there may well be another big fall in Victoria in the September data as the numbers catch up. There will be a clue in the ABS’s next payroll jobs and wages data next week.



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Collaboration in the Gig Economy keynote

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September 17, 2020

Engagement managers already have a much more complex choice than in the past. It’s not just whether to hire a traditional employee to get a job done — the procurement supply chain is much larger. Today’s choices include using a staffing agency temp, engaging an independent contractor, calling in an SOW consultant or turning to an online work platform. And technology continues to bring changes — with Covid-19 speeding up the evolution.

“I would argue that times of crisis and times of change, like we are in today, will help propel the next stage of digital transformation,” SIA President Barry Asin said in a keynote address today kicking off the Collaboration in the Gig Economy virtual conference.

Asin cited technological change wrought by the last recession: In 2007, only 24% of large companies had a VMS in place; by 2010, the percentage had grown to 64%.

Fast forward to today, there was $1 billion in venture capital funding focused on the HR tech space in the second quarter alone.

Large companies that use staffing are turning to tech more and more. SIA data found 43% of large staffing buyers foresee an increase in usage of online staffing/talent pool in the next 10 years. Evolving concepts such as direct sourcing are already used by 30% of buyers, and 49% plan to put a direct-sourcing program in place within the next two years; much of it fueled by new tech offerings.

“I think that what we’re seeing — particularly for the traditional service providers in the talent supply chain — is a real digital transformation, and the current crisis is accelerating that digital transformation,” Asin said. “And it’s accelerating it for all the players involved at the different points of that supply chain.”

Already, 54 million Americans did gig work in 2019, approximately 34% of the workforce, according to SIA data. That amounts to $1.3 trillion in spend with the largest share going to independent contractors. SIA defines the gig economy as including all types of contingent work, encompassing

  • staffing agency temporary workers
  • SOW consultants
  • directly hired temporaries
  • online platform workers
  • independent contractors

The Collaboration in the Gig Economy Conference brings together all parts of the ecosystem to talk the latest trends and advances. Attendees include enterprise buyers, staffing suppliers, VMS/MSP companies, human cloud/on demand platforms and technology solutions providers.

“There is a wave and a transformational change that we are seeing in society,” Asin said. “Many of you are on the leading edge of that change.”

The virtual event continues through tomorrow.

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Australia – Victorian government launches consultation for feedback on its gig economy report

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17 September 2020

The Victorian government inviting Victorians to make submissions about all or some of the recommendations into its report on the gig economy.

The Victorian Government first commissioned its ‘Inquiry into the Victorian On-Demand Workforce’ in September 2018 in response to concerns about the wages and conditions of workers in the on-demand or ‘gig economy’.

The Inquiry, which was chaired by former Fair Work Ombudsman Natalie James, completed its investigations and submitted a report to Government. The report was published in July 2020.

The two-year investigation found that online platforms such as Uber and Deliveroo in Victoria have deliberately framed their arrangements with workers to avoid regulation while other businesses carry the cost of complying with workplace laws.

While some appreciated the flexibility on-demand work provides, James found the uncertain status of workers, who are not classified as employees and therefore do not qualify for workplace entitlements, protections and obligations, was at the heart of the system’s failures of workers.

The report made 20 recommendations for both the federal and state governments aimed at improving protections for on-demand workers.

The Victorian government stated on its site that all submissions will be treated in confidence to allow people to ‘frankly share their views’. The Victorian Government added that it will consider all feedback received before responding to the Inquiry’s Report.

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