Taxes on Gig, Cash, and Self-Employment Income

If you are paid to drive for a rideshare app, deliver food, clean homes, braid hair, or care for children, and no one takes taxes out of your pay, you may be self-employed. That means you are in business for yourself, even if it is a part-time or side job. You must report what you earn, whether you are paid in cash, by check, through an app, or in tips.

One exception: if you work in one family's home and the family controls how you do the work, for example as a nanny or housekeeper, you may be that family's household employee instead. Ask a VITA volunteer if you are not sure.

You must report income even if you never get a tax form. Tax forms are only reports. Here is what you might get:

• Form 1099-NEC from a business that paid you as a non-employee. For payments made in 2026, a business must send one if it pays you $2,000 or more. Before 2026, the amount was $600.
• Form 1099-K from a payment app or online marketplace if you receive more than $20,000 for goods or services in more than 200 payments in a year. If you accept credit or debit cards directly, for example with a card reader, those card payments are reported on a 1099-K at any amount.
• No form at all for many cash jobs. The income still counts.

Money a friend sends to split a dinner bill, or a gift from family, is not business income. Keep personal payments apart from business payments so your records stay clear.

You must file a federal tax return if your net earnings from self-employment are $400 or more, even if your total income is low.

An employee pays 7.65% of their pay for Social Security and Medicare, and the employer pays another 7.65%. When you work for yourself, you pay both parts. This is called self-employment tax. The rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare.

The tax is not figured on all the money you take in. It is figured on 92.35% of your net profit. Net profit is your business income minus your business expenses. You can also deduct half of your self-employment tax when you figure your income tax.

You may also owe regular income tax. That depends on your total income, filing status, deductions, and credits. Many workers with low income owe little or no income tax after the standard deduction, but they still owe self-employment tax. Refundable credits, such as the Earned Income Tax Credit, can lower what you owe or even give you a refund.

Filing with an ITIN? You still report your self-employment income. Whether you also owe self-employment tax can depend on your tax residency, which is not the same as your immigration status. Ask a VITA volunteer to check.

No one takes taxes out of gig pay. If you spend it all, the tax bill can be hard to pay. Protect yourself with a separate account.

1. Open a second account just for taxes. Many banks and credit unions offer free or low-cost savings accounts. See our lesson on opening an account.
2. Each time you get paid, move a set percentage into it. Self-employment tax alone is about 14% of your profit. If you may also owe income tax, save more. The worksheet in IRS Form 1040-ES or a VITA volunteer can help you choose a percentage.
3. Do not use this money for bills. It is for your tax payments.
4. Use it to pay your estimated tax on time.

$385 weekly profit × 15% = about $58 a week, or about $3,000 a year

For Marisol, saving 15% of her profit each week would cover her self-employment tax of about $2,826, with a little left over.

The IRS expects you to pay tax during the year, as you earn income. If you expect to owe $1,000 or more when you file, you generally need to make estimated tax payments. If you pay too little or too late, you may owe a penalty, even if you get a refund later.

If a due date falls on a weekend or holiday, you can pay on the next business day. To avoid a penalty, you generally must pay at least 90% of this year's tax, or 100% of last year's tax (110% if your income was over $150,000). DC, Maryland, and Virginia may also expect estimated payments for their income tax.

Ways to pay the IRS:

• IRS Direct Pay: free, from a checking or savings account, with no sign-in.
• Your IRS Online Account.
• Debit or credit card: the card processor charges a fee.
• Cash at a store, through an IRS-approved retail partner: there is a small fee and a limit on each payment. Pay at least 7 days before the due date. You can also pay cash for free at an IRS Taxpayer Assistance Center, by appointment.
• A check by mail, with a Form 1040-ES payment voucher.

Have a W-2 job too? You can ask your employer to take out extra tax in Step 4(c) of your W-4 instead of making estimated payments. See Read Your Pay Stub and Fill Out Your W-4.

Every business expense you can prove lowers your profit. Lower profit means less self-employment tax and less income tax. Use a paper notebook or an app. Either one works if you keep it up to date.

• Income: save app summaries and monthly statements. Write down cash and tips on the day you get them.
• Mileage log: for each work trip, write the date, the miles, and the reason. Write down your car's odometer reading at the start and end of the year.
• Receipts: supplies, tools, uniforms, cleaning products, and the business part of your phone bill.
• Parking and tolls for work trips. You can deduct these even if you use the standard mileage rate.
• One account for business money, so your bank statements support your records.

Personal trips are not business miles. Traffic tickets and other fines are not deductible. If you want to use the standard mileage rate for a car you own, you must choose it in the first year you use that car for your business.

Keep your tax records for at least three years after you file.