Reason.com: "The current tax administration system isn't working for a significant percentage of on-demand platform small business operators," says Caroline Bruckner, managing director of the Kogod Tax Policy Center at American University. "These tax compliance challenges are only going to continue to grow and impact more and more self-employed small business owners."
2 comments:
I've often thought about this issue - though I've only just started making money and paying taxes - especially because of seeing my parents do taxes and seeing the difference between my father and mother's process and the one I would have to undergo. My mom and dad both work for school districts, receiving one standard paycheck from one place and having taxes solely based on source of income. The forms and premises of their tax code are fairly simple, as taxes go, but for freelancers there can be piles and heaps of forms for each job, less return, and sometimes requires you to calculate your own income taxes. This is a problem for performers and designers especially, who may hold down two or three jobs at the same time even without performing or working at a theater to factor in.
In a perfect world, the tax code would have a specific system for freelance taxpayers to reduce complexity - maybe one form where you input all your job information instead of one per job or simplifying how taxes are reported so different numbers don't mean three or four different forms and complicated codes to fill out that end up taking a tax professional. I'm not a tax code expert, so the solutions could be wrong, but the goal in the end is the same: make it easier to pay and less expensive in the long run to do.
This is exactly what my thesis is tackling! I’ve been doing a lot of research into how the tax code has evolved in this way.
Some interesting developments include that having “benefits” come with a full time job has only been in place since World War II. Roosevelt enacted a wage freeze to curtail inflation and so the only way businesses could lure potential employees to work for them was the benefit package. The practice was supposed to end after the war, but people liked it so much that it stayed. One of the problems for gig workers is that businesses can deduct money spent on benefits as a business expense before taxes, but gig workers must pay taxes on that money.
I absolutely agree that the tax code needs to be updated. I think one of the main problems is that it needs to feel fair to the gig workers. W2 workers are used to seeing less money on their pay check than their actual salary and that is far less shocking than having to pay thousands of dollars all at once at the end of the year or quarterly.
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