The first time money arrives from a gig app or a client, nothing is taken out for taxes. That’s normal: most side gigs make you an independent contractor, not an employee. But it means the tax is still due, and it’s up to you to pay it. Here’s what to know before that first payout.
Side income is taxable, even without a form
Income from gig work, freelancing or selling goods for a profit counts as taxable income. That’s true whether or not anyone sends you a tax form. The forms are for reporting. They don’t decide whether you owe tax.
Self-employment tax
When you work for an employer, Social Security and Medicare taxes come out of each paycheck, and the employer pays a matching share. When you’re self-employed, you pay both shares yourself. That’s self-employment tax, 15.3% (12.4% for Social Security and 2.9% for Medicare), worked out on your net earnings from self-employment. It’s on top of regular income tax.
You generally have to file and pay it if your net earnings from self-employment are $400 or more for the year.
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“Net” is the important word
You pay tax on profit, not on everything you receive. Ordinary and necessary business costs come off first. Depending on the gig, that can include:
- Vehicle use for business. For 2026 the IRS standard mileage rate is 72.5 cents per business mile, or you can deduct actual costs instead.
- Online tools for the business, such as your website, email newsletter service or booking software, to the extent you use them for the business.
- Platform and payment fees
- Supplies, materials and equipment you use for the work
- A share of your phone bill if you use it for the gig
Personal costs don’t count, and you need records to back up what you deduct.
Quarterly estimated payments
Because nothing is withheld, the IRS expects you to pay during the year. If you expect to owe $1,000 or more when you file, you’ll generally need to make estimated tax payments. For most people they’re due around April 15, June 15, September 15 and January 15. If you also have a regular job, raising the withholding on that paycheck can cover some or all of it instead.
A simple habit that helps: move a set share of every gig payment into a separate savings account the day it arrives, so the tax money is there when it’s due.
The forms you might receive
- Form 1099-K comes from payment apps and online marketplaces. Under the One Big Beautiful Bill Act, the federal reporting threshold is back to more than $20,000 and more than 200 transactions in a year. Both must be met, though some states set lower thresholds. Below the threshold you may not get a form, but the income is still taxable.
- Form 1099-NEC may come from a business that paid you for services.
Keep your own records regardless. Don’t rely on the forms to tell you what you earned.
Records that pay for themselves
- A mileage log made as you go: date, miles and purpose.
- Receipts for anything you deduct.
- A separate bank account for gig income and expenses, which makes everything easier at tax time.
- Your app earnings statements, downloaded each month.
Where to get help
The IRS Gig Economy Tax Center explains the rules in plain language. For your own return, a tax professional can help, and if your income is modest, the IRS Volunteer Income Tax Assistance (VITA) programme offers free help.
This is general information about US federal taxes, not tax advice for your situation. State rules differ. For help with your own return, talk to a tax professional, or see if you qualify for free help through the IRS VITA programme.
Sources
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