Gig workers have a few distinct advantages that other workers don't always enjoy, like possibly working from home or setting your own schedule. When it comes to tax filing, however, being self-employed comes with unique challenges.

In the rapidly expanding gig economy, the freedom of freelancing comes with its unique set of financial responsibilities — especially when tax season rolls around. For many gig workers, managing taxes can seem like navigating a maze without a map.

While moving from gig to gig certainly has benefits, simplified tax preparation isn't one of them. Most self-employed workers will attest that dealing with taxes is one of the most challenging aspects of foregoing traditional employment (or supplementing it with a part-time job).

If you have self-employment income, here are a few essential tax tips to remember.

Save Enough Money to Pay Your Tax Bill

Gig workers face a more complex tax situation than traditional employees. Without a payroll department to withhold taxes from each paycheck, it's up to you to manage your tax obligations. This includes making quarterly estimated tax payments to cover your expected tax obligations.

Since paying estimated taxes may be unfamiliar to those getting started in the gig economy, it's critical to note that estimated tax payments are required. If they're not made, the entire bill - plus penalties - will be due all at once. And while the IRS does offer installment plans, you'll pay interest on the money you owe.

Remember Self-Employment Taxes

As a gig worker, you're considered self-employed, which means you're responsible for paying self-employment taxes. These taxes cover Social Security and Medicare, essential components of your future safety net. Unlike traditional employees, where these contributions are split between the worker and the employer, self-employed individuals bear the full responsibility. 

Self-employment taxes are comprised of two main components: Social Security and Medicare. For 2025, the combined rate is 15.3%, with 12.4% going toward Social Security on the first $176,100 of your net earnings and 2.9% allocated to Medicare, with no income limit.

The 15.3% rate might seem steep, but it's important to remember that if you were an employee, you would only pay half of this (7.65%), and your employer would cover the other half. As a self-employed individual, you're considered both the employee and the employer, hence the total rate - though half of self-employment taxes are deductible from your income.

Include estimated self-employment taxes with your quarterly estimated tax payment.

Additional Tax Forms to Complete

If you're a gig worker, the days of spending 15 minutes filing a simple 1040EZ are over. Instead, you'll deal with documents like the 1099-MISC, full 1040, and Schedule C. 

The 1099-MISC is a document you'll typically receive in January that lists all the income paid to you by a client or gig-economy employer. Remember that you're still responsible for paying taxes on each source of income, even if you don't receive the form in the mail. And the Schedule C is a tax form used by the self-employed that details business income and expenses related to the operation of your business.

Maximize Deductions by Keeping Records

Deductions can significantly reduce your taxable income but knowing what you can deduct is critical. Common deductions include home office expenses, travel costs, and necessary equipment or supplies. For example, if you use your car for both personal and gig work, you can deduct the portion of expenses related to your work. Remember, meticulous record-keeping is essential to back up your claims in the event of an audit.

When tracking business expenses for tax purposes, the IRS requires taxpayers to keep documentary evidence to support deductions. This evidence can come in various forms, including paper receipts, bank statements, and credit card statements. However, the type of documentation required can depend on the nature of the expense and the amount.

Paper receipts are often considered the gold standard for documenting business expenses because they provide detailed information about each purchase, including the expense's date, place, amount, and essential nature. 

In some cases, checking account and credit card statements suffice for expense documentation, particularly when they clearly itemize purchases and are used in conjunction with other documentation. For example, a credit card statement might show a purchase at a supply store, which, when paired with a log entry detailing the business purpose of the supplies, could adequately document the expense. However, more than statements alone might be needed to provide sufficient detail for all expenses, especially those requiring a breakdown of goods or services purchased.

Health Insurance Premiums and Retirement Contributions May Lower Your Bill

Incorporating health insurance premiums and retirement contributions into your tax strategy requires careful planning. Still, these deductions and credits can provide meaningful tax relief and financial benefits for many self-employed individuals.

If you purchase health and dental insurance through your business, your premiums may be tax deductible. To qualify for this deduction, you must not be eligible to participate in an employer-sponsored health plan (either through your own business if you have employees and offer a plan or through your spouse's employer).

You can also explore tax deductions (and sometimes even a credit) to offset retirement account contributions. Common options for the self-employed include the Solo 401(k), SEP IRA, and SIMPLE IRA. Each account has its contribution limits and rules.

Leveraging Technology to Keep You on Track

If staying on top of projected tax debts, income streams, deductions, expenses, credits, and receipts sounds like a Herculean task, consider leveraging the power of technology.

Tax preparation software designed specifically for the self-employed and small business owners can simplify the process and ensure you take advantage of all deductions. This includes not only filing taxes at the end of the year but also tracking expenses and estimated taxes along the way.

The Takeaway

Gig workers may enjoy advantages such as working from home or being their own boss. Still, when it comes to tax filing, however, it's typically more challenging to be self-employed. If in doubt, consult a professional to help you navigate the process.