The App Economy and Your Taxes

Like everything else, the pandemic also shifted how individuals earn income through various “side hustles.” Uber, Lyft, and other commonly used digital services took a temporary break during the shutdowns, while newer app-based options such as Robinhood (investing), Coinbase (cryptocurrency), and FanDuel (sports betting) – just to name a few – gained more and more attention. Much of that attention was focused on the ability to make money without ever leaving your couch; however, one little important detail is often left out – you will likely be responsible to pay taxes on some, or all, of that potential income. If you think you might be in that boat for 2021, then keep reading!

  • Investment and speculation apps have been significantly increasing in popularity, but the tax implications are among the least understood. The taxes are very similar whether you are dabbling in individual stocks, ETFs, or Bitcoin, with the big one being capital gains and losses. Other taxes may be due on investments that produce interest and dividends, or hold collectibles, real estate, and foreign property as the underlying asset. You may receive the proper tax forms if you use a more traditional brokerage company; however, you may be responsible for keeping track of your own cryptocurrency transactions.
  • Gambling and sports betting is not a new phenomenon; however, a recent Iowa law permitted the use of online sports betting apps without the need to visit a casino. This change increased sports betting across the state, but consumers may be unfamiliar with the tax consequences of betting on their favorite teams.

Always be sure to check with a tax professional, or contact your local VITA tax site, if you participate in the App Economy and are unsure about the tax implications!

Reminders: 1) If you have a sizable amount of income for which taxes are not withheld, you are supposed to pay quarterly installments to the IRS, and may face a penalty if you have not submitted enough tax payments throughout the year; and 2) For income earned from independent work, your earnings will be subject to self-employment tax as well as income tax.

Ryan Stuart

Ryan is a Human Sciences Specialist in Family Wellbeing and an Accredited Financial Counselor®. He focuses on educating and empowering all Iowans to independently make positive financial decisions throughout their life course.

More Posts

Leave a Reply

Your email address will not be published. Required fields are marked *

    

Subscribe to “MoneyTip$”

Enter your email address:

Delivered by FeedBurner

Archives

Categories