|The modern economic landscape is shifting |
so abruptly, a small business owner in a gig
economy may falter or misfile, prompting an audit.
What the heck is a gig economy you ask?
As the name somewhat implies, it is an economic period where permanent work becomes scarce and most companies rely on hiring independent contractors and temp workers to get corporate work done.
As can be expected, this makes for uncertain influx of income forth bother employers and employees.
Our current economic climate not only alludes to this growing trend, but it also indicates that it may become a permanent fixture in the corporate sector. A recent study by Inuit indicates that 40 percent of US based workers will identify as independent contractors by 2020. There are a number of reasons for this, from the prevalence of online jobs, remote work and tiny entrepreneurial companies that are fueled by internet traffic or revenue sharing ventures.
With so many online businesses, usually sole proprietorships, being established, entrepreneurs will find themselves challenged on how to adequately file their taxes and avoid the kind of red flags that prompt an IRS audit. Adding to the potential of an Internal Revenue visit is how relatively new the phenomenon is. Government agencies are usually slow to adapt to economic and social changes, so they may not have systems in place dedicated to the growing number of gig economy based set ups.
The biggest concern for an e-commerce company, particularly if it is a sole proprietorship or LLC, is the proper reporting of income.
The best way to ensure proper filing is to do so via the 1040 form, the standard tax return for independent contractors. If the business is technically diversified . e.g., you create arts and crafts as well as sing on the weekends in a money making party band, the business owner will have to keep separate records from each enterprise and designate their income separately on both state and federal forms.
Because the modern economic landscape is shifting so abruptly, a small business owner in a gig economy may falter and even misfile, prompting an audit. To avoid this pitfall, such companies may need to rely on a reputable accounting firm to handle their taxes. A reputable company will offer packages that suit the needs of a wide variety of business. When investigating an accounting firm, ask relevant, in depth questions to see if they understand the specific needs of an independent contractor who is subsisting within a gig economy structure. By hiring knowledgeable accounting pros, an independent contractor can remain reasonable free from the threat of an IRS audit, which will grant peace of mind to any business owner, in any type of economic climate.
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