Prop 22 allows “ride-hail” and delivery drivers to continue to be treated as independent contractors with some benefit concessions granted by the proposition, including a minimum earnings guarantee based on “engaged time” when a driver is fulfilling a ride or delivery request, but not the time they spend waiting for a gig.

• For more, read CNN.com
• For more about the Gig Economy, see: “The SmallBusiness.com Guide to the Gig (On-Demand) Economy”

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The following tips are provided by the IRS. SmallBusiness.com is publishing the tips as a public service. (See also, The SmallBusiness.com Guide to the On-demand (Gig) Economy.) Remember: Each small business can have unique tax situations so seek help from your trusted tax advisor, accountant, or other tax advisor.

The gig economy (which is also called many other things, including, the on-demand economy) is an activity where taxpayers earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website. While there are many types of sharing economy businesses, ride-sharing and home rentals are two of the most popular.

Here are some things the IRS says Gig economy participants must remember.

• Income from these sources is taxable, regardless of whether an individual receives information returns. This is true even if the work is full-time, part-time or if an individual is paid in cash.
• Taxpayers may also be required to make quarterly estimated income tax payments and pay their share of Social Security, Medicare or Medicaid taxes.

While providing gig economy services, it is important that the taxpayer is correctly classified.

• This means the business or the taxpayer must determine whether the individual providing the services is an employee or independent contractor.
• Taxpayers can use the worker classification page on IRS.gov to see how they are classified.
• Independent contractors may be able to deduct business expenses, depending on tax limits and rules. It is important for taxpayers to keep records of their business expenses.

Since income from the gig economy is taxable, it’s important that taxpayers remember to pay the right amount of taxes throughout the year to avoid owing when they file.

• An employer typically withholds income taxes from their employees’ pay to help cover income taxes their employees owe.
  
• Gig economy workers who are not considered employees have two ways to cover their income taxes:
  • Submit a new From W-4 to their employer to have more income taxes withheld from their paycheck, if they have another job as an employee.
  • Make quarterly estimated tax payments to help pay their income taxes throughout the year, including self-employment tax.

The Gig Economy Tax Center on IRS.gov answers questions and helps gig economy taxpayers understand their tax responsibilities.

Remember | The tax filing deadline has been postponed to Wednesday, July 15, 2020. The IRS is processing tax returns, issuing refunds and accepting payments. Taxpayers who mailed a tax return will experience a longer wait. There is no need to mail a second tax return or call the IRS.

More Gig Economy Information from the IRS

• Publication 5369 – Gig Economy and your taxes: things to know
• Publication 1779 Independent Contractor or Employee
• Is My Residential Rental Income Taxable and/or Are My Expenses Deductible?

The term “gig economy” (also called “on-demand economy”, “sharing economy,” or “access economy”) refers to activity in which people earn income from providing on-demand work, services or goods. Another term for the gig economy is “small business.” Often, the work seems like a new type of economy because it is coordinated through a digital platform like an app or website.

People involved in the gig economy earn income as a freelancer, independent worker or employee. They use technology to provide goods or services. This includes things like renting out a home or spare bedroom and providing car rides.

The following tax preparation advice and other information from the IRS contain pre-planning help for gig economy participants when it’s time to file their tax return. (As always, because your business can be unique, people are advised to seek advice from their trusted financial and tax advisors.)

Here are some things gig economy participants should know about their taxes:

• Money earned through gig economy work is usually taxable.
   
• There are tax implications for both the company providing the platform and the individual performing the services.
   
• This income is usually taxable even if :
  
  • The taxpayer providing the service doesn’t receive an information return, like Form 1099-MISC, Form 1099-K, or Form W-2.
  • Activity is only part-time or side work.
  • The taxpayer is paid in cash.
     
• People working in the gig economy are generally required to pay these types of taxes.
  
  • Income taxes.
  • Federal Insurance Contribution Act or Self-employment Contribution Act tax.
  • Additional Medicare taxes.
     
• Independent contractors may be able to deduct business expenses. These taxpayers should double-check the rules around deducting expenses related to the use of things like their car or house. They should remember to keep records of their business expenses.
   
• Special rules usually apply to rental property also used as a residence during the tax year. Taxpayers should remember that rental income is generally fully taxable.
   
• Workers who do not have taxes withheld from their pay have two ways to pay their taxes in advance. Here are these two options:
  
  • Gig economy workers who have another job where their employer withholds taxes from their paycheck can fill out and submit a new Form W-4. The employee does this to request that the other employer withholds additional taxes from their paycheck. This additional withholding can help cover the taxes owed from their gig economy work.
    
  • The gig economy worker can make quarterly estimated tax payments. They do this to pay their taxes and any self-employment taxes owed throughout the year.
    

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At SmallBusiness.com, we purposefully do not report news related to startups who are raising millions of dollars. Nothing against them, but they get plenty of coverage without our help. However, one startup segment embraced early by Main Street small businesses is food-delivery services. (It shouldn’t be surprising as pizza delivery helped create the concept decades ago.) Food delivery services show no sign of slowing, according to Steve King, a partner at Emergent Research and a regular contributor to SmallBusiness.com who shared with us the following:

By Steve King | During the past two weeks, delivery services DoorDash and London-based Deliveroo announced substantial funding rounds. 

$575 Million | Amazon is leading a $575 million funding round in the UK-based Deliveroo. If you aren’t familiar with the company, it operates in 14 countries and has 60,000 couriers that deliver from 80,000 restaurants globally. The current round of funding raises the company’s valuation to $1.53 billion.

$13 Billion | DoorDash is raising $400 million at a $13 billion valuation (up from a $7.1 billion valuation in February.

There are two key reasons food delivery is considered a big opportunity that is attracting these investments.

First, the potential is huge and the market is rapidly growing. Key stats from Manhattan Venture’s research report on Postmates (PDF), yet another food delivery company:

$30 billion | Estimated current U.S. food delivery market, 2019
$365 billion | Estimated value of U.S. food delivery market in 2030
5% – 10% | Fraction of restaurant sales that are currently delivered
20% | Fraction of restaurant sales set to grow to 20%

Second, investors believe food delivery business models can be profitable. (Based on the financial performance of the publicly traded Grub Hub.)

This marks Amazon’s renewed interest in this space. Amazon Restaurants pulled out of the U.K. last year and is only available in a limited number of U.S. cities. It is worth watching. It’s clear they see the delivery of anything and everything as being their target market.

But the consensus among investors so far is this: Food delivery is a big enough market with room for multiple players to be successful. 

And with the growth of delivery services, new markets will continue to open up to the small and local food stores and restaurants who market to those who’d prefer to stay home for dinner tonight

Jack Taylor / Stringer / GettyNews

The freelancer marketplace Upwork went public this morning (Wednesday, October 3, 2018) on the Nasdaq stock exchange. It priced shares at $15 apiece, raising $187 million through its initial public offering. That gave Upwork an initial market capitalization of nearly $1.6 billion.

(We don’t like to use the term “Uber for X,” but if you must call it something, call it an Uber for Freelancers. Competitors include Voices.com, Freelancer.com, and Fiverr.)

In its filing, Upwork included these statistics for the twelve months that ended June 30, 2018.

$1.56 billion | “Gross services volume” (a metric Upwork uses that represents the total amount of transactions carried out between freelancers and clients using its network).

2 million | Number of projects enabled

375,000 | Number of freelancers registered on Upwork

475,000 | Number of clients registered on Upwork

180 | Number of countries served by Upwork

Upwork was formed in 2014 when Elance and oDesk, two of the earliest and largest online talent marketplaces, combined as a new company.

The market is officially open! #UpworkTogether #NYC #NewYork pic.twitter.com/dlwTnp6IQ1

— Nasdaq (@Nasdaq) October 3, 2018

Photo | GettyImages

As we have reviewed before, large retailers–especially those with grocery stores–are in the midst of a great war over what they call, “the last mile.” The term refers to the distance between a grocery store and a customer’s home. While the biggest battles are among large retailers, small specialty shops and restaurants are part of the fray as more and more customers are seeking deliveries of prepared meals (in addition to pizza).  Steve King, our regular contributor on the topic of on-demand (or “gig”) economy,  first predicted this talent war four years ago.

Here are just some of the recent developments on the food delivery front. 

Previously | Working with Postmates, Shopify’s e-commerce merchants can now offer local same-day delivery in 200+ U.S. locations.

Walmart has been testing several on-demand “last mile” options

• Walmart is working on “last mile” solutions with Uber and Deliv in several markets, including Dallas, Denver, Orlando, Phoenix, Tampa, and San Jose.
• Walmart shut down a test program in July that paid Walmart employees for delivering groceries after their regular shifts.
• Using Nashville and New Orleans as pilot markets, Walmart has started a program called Spark Delivery.
• Last week, it announced a pilot program called Spark Delivery.
• Walmart and Google Express have a shopping, delivery relationship

Walmart also investing heavily in its “pickup” program

Walmart pickup program | An online grocery pickup program allowing grocery orders at local stores without getting out of their cars. The “personal shoppers” who work in the pickup program will also support the delivery program.

25,000 | Number of “personal shoppers” who work at Walmart stores, up from 18,000 earlier this year.
1,800 | Number of stores with pickup delivery
2,100 | Number of stores with pickup programs to be open by the end of 2018

Target

Target acquired the delivery firm Shipt, Inc. for $550 million in cash. “The acquisition significantly accelerates Target’s digital fulfillment efforts, bringing same-day delivery services to guests at approximately half of Target stores by early 2018,” the company said in a statement.

Amazon

As we recently reported, Amazon is breaking new ground with its Delivery Service Partnership that will seed the creation and ownership of small delivery services. Amazon also has an on-demand service called Amazon Flex.

Photos | Walmart, GettyImages

TaskRabbit, the on-demand home-service platform acquired last October by Ikea, announced that it has taken down its site and app in order to investigate a cybersecurity incident.

Update: By April 18, the site is back up, accompanied by this letter from CEO Stacy Brown-Philpot.

Founded in 2009, TaskRabbit was an early “gig-economy” success. Using a smartphone app to facilitate task-matching, TaskRabbit allows customers needing help with a home service to find “taskers” who have the necessary skills. Typical tasks are services like cleaning up a yard, organizing a closet or delivering a package across town. Last October, TaskRabbit was acquired by Ikea.

The company said it was working with a cybersecurity firm but didn’t specify what happened, how many people may have been affected or how it learned of the security breach.

The company said it had notified clients and “taskers,” those who offer their services and have been vetted by the company, and said it would reschedule any uncompleted tasks and compensate workers for the tasks that couldn’t be completed Monday because of the disruption, according to WSJ.com.

The message now appearing on the site’s homepage (4.27.2018)

Dear TaskRabbit Community,

TaskRabbit is currently investigating a cybersecurity incident. We understand how important your personal information is and are working with an outside cybersecurity firm and law enforcement to determine the specifics. The app and the website are offline while our team works on this.

We will be back in contact with you with more information once we have it. As an immediate precaution, if you used the same password on other sites or apps as you did for TaskRabbit, we recommend you change those now.

Thank you for your patience while we investigate the issue and for being such an important part of our community.

– TaskRabbit Team

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Also on SmallBusiness.com

Two Small Business Trends That Contributed to Ikea’s Decision to Buy TaskRabbit | 2017

The rise of the on-demand (or “gig”) economy (like drivers who provide rides via Uber or Lyft) is not only changing the way its participants work, it is also changing how companies provide insurance to those participants.

A recent article in the Economist provides this example: A courier hits and injures a pedestrian.

• If the courier company employs the driver and provides the worker a van and salary, the accident would be covered by a standard commercial insurance policy.
• But on-demand “gig” couriers, who use their own cars and work whenever they choose, must often insure themselves. Even if the courier has personal insurance coverage, it will not usually pay out for accidents that happen while they are driving for work. If the coverage is available, it can be expensive.

This isn’t a problem, it’s an opportunity

Insurance by the hour | The UK startup, Zego, brokers third-party liability insurance for couriers who pay for the insurance by the working hour. Coverage starts when they activate the courier’s smartphone app and stops when they sign off.

Insurance by the mile | Uber drivers, through the insurance broker Aon, can purchase coverage against illness, disability, and death for as little as $0.04 for each mile they drive. If local regulations allow, Uber will raise the rate it pays drivers by the same amount, making it look like an employment benefit but in the context of an independent worker approach.

Insurance by stages of risk | In Ontario, Uber and Lyft both have brokers who have packaged a “three-stage” approach.

Insurance by the user | Since 2011, Airbnb has offered a “host guarantee” against theft and vandalism. While it works like insurance, no third-party firm is involved. Airbnb makes payouts itself.

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Also on SmallBusiness.com

As we have reported extensively, the marketplace of talent called the “on-demand” or “gig” economy is tapping unmet needs that many economists, analysts, and even participants, aren’t yet fully grasping. However, yesterday’s news that Ikea has acquired TaskRabbit could help a mainstream audience learn what’s going on — and perhaps even convince them to participate. (Note: At SmallBusiness.com, we have a big-tent definition of “small business” that includes participants in the gig economy. We also have shared how small businesses are emerging from the on-demand economy. In other words, we believe the 60,000 independent contractors who get jobs via TaskRabbit represent a major wave of small businesses that we will continue to follow for the users of SmallBusiness.com.

Two trends that led Ikea to buy TaskRabbit?

Trend #1 | The Do It For Me (DIFM) customer

Ikea is not only a furniture and home furnishings juggernaut, it is a cultural icon and lifestyle business  (to some) that is so pervasive, stand-up comics can get chuckles just by mentioning its name. It has spawned websites like IkeaHackers.net, communities of Ikea lovers who are devoted to the endless ways that its products can be reconfigured (or “hacked”) into creative uses.

However, for some, the directions for putting together something purchased at Ikea, while creative and easier than similar instructions from other companies, is still somewhat daunting for those who don’t care to be do-it-yourselfers. Many, if not most, customers want someone else to put the “flat box” product together.

Many companies have recognized there is a massive “Do it for me” (DIFM) group that prefers spending a little extra money instead of spending an afternoon spreading out nuts and bolts across the kitchen floor and making a couple of trips to a hardware store. Established companies and startups have stepped in to create an on-demand marketplace for “DIFMers” and those who can do it. One of the earliest and most successful, at least at raising venture capital and reaching more cities, has been TaskRabbit.

Among the many other DIFM players are the merged HomeAdvisor-Angie’s List and Amazon Home Services.

Trend #2 |The on-demand economy is going mainstream

As you are reading this in a section of SmallBusiness.com called, “The SmallBusiness.com Guide to the On-Demand Economy,” you can look on the right side of the screen (or bottom of this article if you’re reading this on a phone) and note several years of articles about the on-demand economy (or gig economy). As we’ve observed, there’s an Uber for everything. You can find startup companies that will do your laundry, bring you booze, walk your dog, and give you a massage.

If the growth of the number of Americans working in the on-demand economy continues its predicted growth, by 2021 it will represent a 23 percent compounded annual growth rate, according to our regular contributor, Steve King. And, as Steve recently wrote, two-thirds of the on-demand economy participants say they are satisfied with their work.

On the downside, however

As we have noted, there are threats to the gig economy. The most obvious one is the legal question regarding the definition of “employee.” With the growth of the on-demand economy, there also could be a talent war. For example, we there already being a high demand for talent in the construction field, the fees that can be charged for certain home services talent are increasing.

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