Tax Management and Business Expenses for Gig Workers

Level: Avanzado Category: app-specific Subcategory: financial-management Target Audience: all-gig-workers Cultural Context: US tax system for contractors

Description

Essential vocabulary and procedures for managing taxes as independent contractor

Vocabulary

| English | Spanish | Pronunciation | Context | |---------|---------|---------------|---------| | Independent contractor / Self-employed | Contratista independiente / Trabajador autónomo | kon-trah-TEES-tah een-deh-pen-dee-EN-teh / trah-bah-hah-DOR ow-TOH-noh-moh | Your legal employment status (NOT employee) | | Tax deduction / Write-off | Deducción de impuestos / Gasto deducible | deh-dook-see-ON deh eem-PWES-tohs / GAS-toh deh-doo-SEE-bleh | Business expense that reduces taxable income | | Quarterly estimated taxes | Impuestos estimados trimestrales | eem-PWES-tohs es-tee-MAH-dohs tree-mes-TRAH-les | Tax payments made four times per year | | Form 1099-NEC / 1099-K | Formulario 1099-NEC / 1099-K | for-moo-LAH-ree-oh mil noh-VEN-tah ee nweh-veh | Tax form showing your annual earnings from platforms | | Schedule C | Anexo C / Schedule C | ah-NEK-soh seh / schedule seh | Tax form for reporting business profit or loss | | Self-employment tax | Impuesto de trabajo autónomo | eem-PWES-toh deh trah-BAH-hoh ow-TOH-noh-moh | Additional 15.3% tax for Social Security and Medicare | | Mileage / Standard mileage rate | Kilometraje / Tarifa estándar por milla | kee-loh-meh-TRAH-heh / tah-REE-fah es-TAN-dar | IRS allows deduction of $0.655 per mile (2023 rate) |

Cultural Notes

Self-Employment Responsibility

US system puts all tax responsibility on you. No employer withholds or manages taxes

Colombian Comparison: Very different from Colombian employment tax withholding system

Documentation Culture

IRS requires extensive documentation. Verbal agreements or memory not sufficient

Colombian Comparison: More documentation-heavy than Colombian informal economy

Tax Compliance Importance

IRS has significant enforcement power. Not paying taxes = serious legal consequences

Colombian Comparison: More systematic enforcement than in many Colombian contexts

Professional Help Value

Paying for CPA or tax software is normal and wise investment for self-employed

Colombian Comparison: More common to use professional help than in Colombian informal economy

Tax Basics

{
"employmentStatus": {
"reality": "You are NOT an employee of Uber, Lyft, DoorDash, etc.",
"status": "Independent contractor / self-employed business owner",
"implications": [
"No taxes withheld from payments - you must pay them",
"No employer benefits (health insurance, 401k, unemployment)",
"Must pay both employee AND employer portion of Social Security/Medicare (15.3%)",
"But: Can deduct business expenses that employees cannot"
]
},
"taxRates": {
"federalIncome": "10-37% depending on total income (progressive brackets)",
"selfEmployment": "15.3% (Social Security 12.4% + Medicare 2.9%)",
"state": "0-13% depending on state (some states have no income tax)",
"local": "Varies by city/county",
"total": "Typically 25-40% of net profit goes to taxes"
},
"quarterly Payments": {
"requirement": "Must pay estimated taxes quarterly if you owe $1,000+ annually",
"dueDates": [
"Q1: April 15 (January-March income)",
"Q2: June 15 (April-May income)",
"Q3: September 15 (June-August income)",
"Q4: January 15 of next year (September-December income)"
],
"penalty": "Underpayment penalty + interest if you don't pay enough quarterly",
"howTo": "IRS Form 1040-ES or pay online at irs.gov/payments"
}
}

Deductible Expenses

{
"vehicle": {
"twoMethods": "Standard mileage rate OR actual expenses (choose most beneficial)",
"standardMileage": {
"rate": "$0.655 per business mile (2023 - check current year)",
"includes": "Gas, maintenance, depreciation, insurance",
"tracking": "MUST track every business mile with log",
"example": "10,000 business miles × $0.655 = $6,550 deduction"
},
"actualExpenses": {
"includes": [
"Gas",
"Oil changes and maintenance",
"Repairs",
"Tires",
"Car washes",
"Insurance",
"Registration and fees",
"Lease payments or depreciation",
"Parking and tolls for business"
],
"calculation": "Total expenses × business use percentage",
"example": "If 80% business use, deduct 80% of all vehicle expenses",
"complexity": "More tracking required but can be higher deduction"
},
"cannotDeduct": [
"Commute from home to first ride (and last ride back home)",
"Personal trips",
"Traffic tickets",
"Personal portion of insurance"
]
},
"phone": {
"deductible": "Business use percentage of phone bill and phone purchase",
"typical": "80-90% business use for rideshare (higher than typical job)",
"calculation": "Monthly bill $100 × 80% business = $80/month deduction",
"tracking": "Review phone usage; most time is for gig apps"
},
"supplies": {
"deductible": [
"Phone chargers and mounts",
"Insulated delivery bags",
"Water bottles for passengers",
"Tissues, mints, gum",
"First aid kit",
"Cleaning supplies for vehicle",
"Dash cam",
"Jumper cables and emergency kit"
],
"fullyDeductible": "100% business use items"
},
"services": {
"deductible": [
"Accountant or tax preparer fees",
"QuickBooks or tax tracking software",
"Roadside assistance (AAA)",
"Background check fees",
"Vehicle inspections required by platform"
]
},
"other": {
"deductible": [
"Platform service fees (if you pay any)",
"Bottled water and snacks for passengers",
"Parking fees during work",
"Tolls for work trips",
"Car wash expenses",
"Meals during work (50% deductible)",
"Work-related training or courses"
]
}
}

Record Keeping

{
"criticalRule": "No documentation = no deduction. IRS requires proof",
"mileageLog": {
"required": [
"Date of trip",
"Starting location",
"Ending location",
"Purpose (passenger pickup, food delivery, etc.)",
"Miles driven"
],
"methods": [
"Stride Tax app (free, automatic)",
"Everlance app",
"Hurdlr app",
"Paper logbook (backup)",
"Platform mileage reports (supplement only - not complete)"
],
"frequency": "Track EVERY business trip. Recreating months later = IRS rejection"
},
"receipts": {
"keep": "All receipts for business expenses over $75. Under $75 can use credit card statement",
"duration": "Keep for 3 years minimum (IRS can audit back 3 years, 6 if major issues)",
"method": [
"Photo every receipt immediately with phone",
"Use Expensify, QuickBooks Self-Employed, or similar app",
"Store in cloud (Google Drive, Dropbox) - never lose them",
"Organize by category and month"
]
},
"incomeTracking": {
"platforms": "Platforms provide annual summary (1099 forms)",
"tips": "Track cash tips separately - platforms don't report these",
"bonuses": "Track all bonuses and incentives",
"weekly": "Download weekly earnings summary from each platform as backup"
}
}

Calculating Net Income

{
"example": {
"grossEarnings": "$50,000 (what platforms paid you)",
"minus": {
"mileage": "$19,650 (30,000 miles × $0.655)",
"phone": "$960 (80% of $1,200 annual)",
"supplies": "$500 (water, chargers, etc.)",
"carWash": "$600",
"tolls": "$300",
"other": "$490"
},
"totalDeductions": "$22,500",
"netIncome": "$27,500 (this is your taxable income)",
"taxes": {
"selfEmployment": "$3,883 (15.3% of $27,500, with half-deduction)",
"federal": "$2,200 (approximately, depends on filing status)",
"state": "$1,375 (5% state rate example)",
"total": "$7,458 estimated total tax"
},
"takeHome": "$20,042 after all taxes"
},
"important": "This is why tracking expenses is CRITICAL. $50k gross becomes $20k take-home"
}

Tax Filing

{
"forms": [
{
"form": "Schedule C (Form 1040)",
"purpose": "Report business income and expenses",
"who": "All self-employed individuals"
},
{
"form": "Schedule SE",
"purpose": "Calculate self-employment tax (Social Security + Medicare)",
"who": "If net earnings over $400"
},
{
"form": "Form 1040",
"purpose": "Main tax return form",
"who": "Everyone"
}
],
"timing": {
"deadline": "April 15 (or next business day)",
"extension": "Can file extension to October 15, but must pay estimated tax by April 15",
"penalty": "Failure to file or pay = penalties and interest"
},
"howToFile": [
"TurboTax Self-Employed (user-friendly, $119-169)",
"H&R Block Self-Employed",
"FreeTaxUSA (less expensive option)",
"Accountant/CPA (recommended if earnings over $50k or complex situation)",
"IRS Free File (if income under $73k)"
]
}

Common Mistakes

{
"notTrackingMileage": {
"error": "Thinking platform tracking is enough (it's not - often incomplete)",
"consequence": "Lose thousands in deductions. Example: 25,000 miles not tracked = $16,375 lost deduction",
"solution": "Use Stride or Everlance from Day 1"
},
"notPayingQuarterly": {
"error": "Waiting until April to pay all taxes",
"consequence": "Underpayment penalty plus huge bill you may not have saved for",
"solution": "Set aside 25-30% of each payment immediately. Pay IRS quarterly"
},
"mixingPersonalBusiness": {
"error": "Not separating personal and business vehicle use",
"consequence": "Can't claim business deductions on personal use. IRS audit risk",
"solution": "Track every trip. If you make personal trip, note it as personal"
},
"noReceipts": {
"error": "Claiming deductions without receipts",
"consequence": "IRS audit = deductions disallowed + penalties + interest",
"solution": "Photo every receipt immediately. Use app to organize"
},
"wrongMethod": {
"error": "Using standard mileage when actual expenses would be better (or vice versa)",
"consequence": "Paying more tax than necessary",
"solution": "Calculate both methods or use tax software that compares"
}
}

State Specifics

{
"noIncomeTaxStates": [
"Alaska",
"Florida",
"Nevada",
"South Dakota",
"Tennessee (starting 2021)",
"Texas",
"Washington",
"Wyoming"
],
"note": "Still must pay federal and self-employment tax",
"highTaxStates": "California (up to 13.3%), New York (8.82%), Hawaii (11%)",
"additionalLocal": "Some cities (NYC, San Francisco) have additional income taxes"
}

Help Resources

{
"free": [
"IRS.gov - Free tax information and forms",
"VITA (Volunteer Income Tax Assistance) - Free tax prep for income under $60k",
"Score.org - Free small business mentoring",
"Gig worker Facebook groups for peer advice"
],
"paid": [
"CPA specializing in self-employment ($200-500 for tax prep)",
"QuickBooks Self-Employed ($15/month - tracks income, expenses, mileage)",
"TurboTax Self-Employed ($119-169/year)",
"Stride Tax (free app for mileage and expense tracking)"
],
"spanish": [
"Many VITA sites have Spanish-speaking volunteers",
"TurboTax available in Spanish",
"IRS has Spanish language forms and publications (irs.gov/spanish)"
]
}

Conversation Phrases

{
"explainingToOthers": {
"english": "I'm self-employed as an independent contractor. I have to handle my own taxes and business expenses.",
"spanish": "Soy trabajador autónomo como contratista independiente. Tengo que manejar mis propios impuestos y gastos de negocio.",
"pronunciation": "soy trah-bah-hah-DOR ow-TOH-noh-moh"
},
"askingForHelp": {
"english": "Do you know a good accountant who works with self-employed people?",
"spanish": "¿Conoce un buen contador que trabaje con personas que trabajan por cuenta propia?",
"pronunciation": "koh-NOH-seh oon bwen kon-tah-DOR"
},
"bankDiscussion": {
"english": "I need to set aside money for quarterly tax payments.",
"spanish": "Necesito apartar dinero para pagos de impuestos trimestrales.",
"pronunciation": "neh-seh-SEE-toh ah-par-TAR dee-NEH-roh"
}
}

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Generated from: app-006 Source: JSON Resources Integration Script