The document discusses the tax implications of being an on-demand or independent contractor worker. It notes that as an independent contractor, the worker is running their own business and must pay self-employment taxes and file quarterly estimated tax payments. Expenses related to the work can be deducted to reduce taxable income or profits. Some examples of deductible expenses include supplies, vehicle expenses, home office, insurance, and licenses or fees. The document provides an overview of the key tax differences and obligations between being an employee and independent contractor.

1. Taxes and the On-
Demand Worker
Rebecca Brown, EA, MBA

2. On-Demand Workers Are Not Employees!
 This may come as a shock, but if you are an
on-demand worker, you do not work for
your employer.
 You do work for your company, but you do
not work for it.
 On-demand workers are independent
contractors rather than employees.

3. What’s the Difference?
 Employees are on payroll. The company pays them a set amount per
hour they are on the clock even if there’s no work for them to do.
 Independent contractors work only when there is work to do and get
paid only for hours spent actually working.
 An employee can be told when, where, and how to work; an
independent contractor can not.
 Employers must pay payroll taxes, unemployment insurance, and
other expenses for employees.
 Independent contractors pay self-employment taxes and all the other
expenses incurred with running a business.

4. In case you missed that last bullet…
Independent Contractor = Business
Owner

5. How Does This Affect Your Taxes? You
must now pay the following:
 Self-employment taxes. When you are an employee, your
employer pays half of your social security and medicare
taxes and you pay the other half. The total is 15.30% of
your net profits.
 Income taxes. They won’t be automatically deducted from
your paychecks anymore.
 State and local taxes.
 Any other federal, state, and/or local fees or taxes
required by law.

6. Pay as You Go and the Quarterly Tax
System
 The U.S. tax system is a pay as you go system; this means you
are required to pay your taxes as they are incurred each
quarter if the total will be more than $1000 for the entire year.
 Accrued taxes are due each quarter. The due dates for the
current year can be found on the IRS website.
 Each state is different, so check the Department of Revenue for
your state to find out what the local rules are.
 The same goes for city and county taxes. A phone call to city
hall is in order to find out the local requirements.

7. Now for the good news…
Taxes are only paid on net profits.
Net profits = gross income minus
expenses and other allowable
deductions.
This DOES NOT necessarily equal cash
flow. Profit for tax purposes is
different from cash profits.

8. Allowable Expenses Depend on the Job,
But May Include…
 Supplies, equipment, and postage
 Licenses and fees paid to the city or the company
 Marketing costs
 Insurances
 Home office use
 Phone and internet bills, or portions thereof
 Detailing and maintenance
 Health insurance
 Depreciation
 Miscellaneous Expenses

9. A Quick Word on Vehicle Expenses
 The IRS allows you to deduct either a standard rate for each mile driven for
business purposes or actual expenses.
 The standard rate for 2016 is 0.54 per mile. If you take the standard rate, you
can still deduct parking fees, tolls, car washes, etc., but not maintenance,
car insurance, or payments.
 The other option is to deduct actual expenses. This includes all maintenance
fees, all insurance payments, car payments, new tires, and so forth.
 Calculate your deduction both ways to see which will give you the biggest
deduction. This deduction alone might give you a net loss for tax purposes.
 Guessing isn’t allowed! You have to keep track of your expenses and your
mileage. There are a number of apps that will do this automatically now.

10. Conclusion
 As an independent contractor, you are a business owner.
 Business taxes are more complicated than personal taxes.
 Take every deduction you are allowed to reduce your tax
bill.
 Pay your quarterly taxes on time to avoid IRS penalties.
 Good luck with your business!

11. If You Need Professional Help
 Contact me at my website,
http://rebeccabrowntaxconsulting.com/contact or call me at 1-877-270-
0293.
 Read the full article here:
http://rebeccabrowntaxconsulting.com/blog/taxes-and-the-on-
demand-worker