Gig work has been a game changer for many people, allowing them to parlay skills into side work that can add income without having to formally get a new job.
Find Out: 6 Reasons Your Tax Refund Will Be Higher in 2025
Explore More: 3 Sneaky Things You Didn’t Realize Your Tax Software Was Doing — And How to Stop Them This Year
The downside is that it’s easy to overlook tax implications, especially for anyone who has never done gig work before.
To save gig workers surprises at tax time, tax experts shared some of the common tax mistakes gig workers make, so you can avoid them.
Not Tracking Income Accurately
Failing to track all income, even what may feel like small amounts, can lead to underreporting and tax issues. It’s essential to keep detailed records of every gig payment and invoice. Using apps or spreadsheets to log income will ensure that you’re staying compliant and avoiding penalties, according to Christopher Stroup, CFP and owner of Silicon Beach Financial. This includes cash payments such as tips.
Learn More: 7 Tax Loopholes the Rich Use To Pay Less and Build More Wealth
Misclassifying Business Expenses
Deductions are the lifeblood of a gig worker because they reduce your taxable income.
“Gig workers often miss out on deductions by incorrectly categorizing their expenses,” Stroup said. You’ll want to ensure that your expenses, like supplies, home office use and vehicle mileage are tied to your business.
“I’d recommend that you meet with a tax professional who can help you claim the right deductions for your business.”
Forgetting To Pay Self-Employment Taxes
Unlike traditional employees, gig workers are also responsible for paying self-employment taxes, which includes Social Security and Medicare. Failure to account for this can lead to a larger tax bill down the road, Stroup said.
Not Setting Aside Enough Money
It’s easy not to put enough money aside for your taxes, according to Chris Rivera, CPA and founder of The Ecommerce Accountants. “A common rule of thumb is to save 25% to 30% of your income for taxes, but many gig workers underestimate this amount, especially if they have high earnings.”
Neglecting or Missing Quarterly Estimated Taxes
Many gig workers overlook quarterly estimated tax payments because they think they’ll handle everything at the end of the year, Stroup said, which is a problem. “Unbeknownst to them, this approach can lead to unnecessary penalties and interest. It’s best to make payments every three months to avoid surprises during tax season.”
Those estimated quarterly taxes are typically due in April, June, September and January, but it’s easy to forget to pay them, particularly the fourth-quarter one, which is typically due in January of the next tax year, Rivera pointed out.
Mixing Personal and Business Finances
To account for your business expenses related to your gig work, you need clear and accurate accounting. “Without separate accounts, it’s harder to track income and expenses, leading to inaccurate tax savings,” Rivera warned.
Forgetting Digital Payment Platforms
If you’re only tracking income that comes through a check or a direct deposit and forgetting about digital payments, you’re likely failing to report most of your gig-based income.
“With the IRS’ $600 threshold for platforms like PayPal or Venmo (in effect for 2023 onwards), gig workers may unintentionally underreport income if they don’t reconcile payments,” Rivera said.
Avoiding these mistakes can save you money at tax time.
More From GOBankingRates
- These Are the 5 Biggest Discrepancies With How People Bank by Generation
- 3 Things You Must Do When Your Savings Reach $50,000
- Find Your State: The Best Banks of 2025 For Each State
- 9 Things You Must Do To Grow Your Wealth in 2025
This article originally appeared on GOBankingRates.com: 7 Tax Mistakes To Avoid If You’re a Gig Worker
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
