The COVID-19 pandemic led to many Pennsylvanians pursuing employment in different job sectors, including the "gig economy." This includes people who worked full-time or part-time as a "gig worker." With the 2020 tax filing season underway, the Department of Revenue wants to help provide gig workers with information that will help them file the Pennsylvania Personal Income Tax Return (PA-40). The guidance below is for educational purposes and pertains to Pennsylvania taxes — not federal taxes.
Are You a Gig Worker?
A gig worker is a person who works temporary jobs typically as an independent contractor, freelancer or a worker in the gig economy.
What is Gig Work?
Gig work is often performed through an app, website and other digital platforms to earn income. Gig work can include:
- Driving a car for booked rides or deliveries
- Running errands or completing tasks
- Providing other temporary, on-demand or freelance work
Note: The examples above do not include all types of gig work. If you are unsure if you are an employee or independent contractor, contact your employer for additional clarification.
Are Gig Workers Required to File a PA Personal Income Tax Return?
Yes. All Pennsylvania taxpayers who receive more than $33 in total gross taxable income in a calendar year must file a Pennsylvania personal income tax return.
If you do gig work as an employee, the gig employer may withhold tax from your paycheck. If you do gig work as an independent contractor or freelancer, and the gig employer does not withhold tax, each year you may have to personally withhold a portion of your income to fulfill your PA personal income tax obligation.
If you do not have tax withheld by your employer, you may also be required to make estimated tax payments. If your net income as a gig worker plus any other income (other than employee compensation where PA tax was withheld) is greater than $8,000, you should make quarterly estimated payments. To find out more about estimated payments refer to the REV-413 I, 2021 Instructions for Estimating PA Personal Income Tax, and the REV-414 (I), 2021 Individuals Worksheet for Estimated Tax.
How do Gig Workers File a PA Personal Income Tax Return?
Gig workers should report earned income and incurred expenses while performing gig work on PA-40 Schedule C. To complete the PA-40 Schedule C, a gig employer should provide the gig worker with one or more of the following IRS tax documents:
- 1099-K – If a gig worker earned more than $5,000 in customer payments in the last year, they should be sent Form 1099-K. This form includes a breakdown of your annual gross earnings.
- 1099-NEC – Some gig employers may provide monetary incentives to become a gig worker, such as sign-up bonuses, promotional referrals or other miscellaneous payments. If a gig worker received $600 or more of these types of payments, they may receive Form 1099-NEC, which provides a summary of those payments.
- 1099-MISC – As a gig worker, you may also receive monetary prizes, awards or compensation while performing gig services. In these instances, a gig worker who received $600 or more of these types of payments may receive Form 1099-MISC, which provides a summary of those payments.
Note: If the income reported to a gig worker does not include the amount of tips received, that income is required to be included when filing PA-40 Schedule C. Any cash tips not reported to a gig employer should also be included. Additionally, if you have income from one of the types listed above under the descriptions for 1099-K, 1099-NEC, or 1099-MISC and the income amount is under the threshold for reporting the income to you on such forms, the income you received must still be reported.
Filing Your PA Personal Income Tax Return with myPATH
myPATH is a free, user-friendly option that allows most taxpayers to seamlessly file the Pennsylvania Income Tax Return (PA-40) and make income tax payments. The system also helps gig workers complete the PA-40 Schedule C noted in the prior section.
Using the electronic filing option available through mypath.pa.gov also offers many benefits, including:
- Fast and free return/refund processing
- The benefit of error-reducing automatic calculators
- The "Where's My Income Tax Refund?" system to track the status of a refund
- Instant confirmation of a successful filing
- User-friendly options that are not available to taxpayers filing by paper
- The ability to view a detailed Statement of Account for personal income tax
Learn more about the online filing features available for Pennsylvania personal income tax by visiting mypath.pa.gov.
As a gig worker, keeping records and receipts throughout the year can help track deductible expenses, which could help lower the tax amount you owe when it comes time to file.
The list below are some deductible expenses that may benefit gig workers:
- Vehicle Expenses/Mileage - Taxpayer vehicle expenses may be claimed using actual expenses or the federal standard mileage rate method for the business use portion of the vehicle. Visit the department's website for more information on how to calculate unreimbursed business expense mileage.
- Interest on a Car Loan - Interest on a car loan may be deductible to the extent of the business use portion of the vehicle.
- Other Business Expenses - Necessary, actual and directly related business expenses may be deductible, such as supplies for use by customers.
Note: The examples provided above do not include all deductible expenses. For more information on reporting expenses, please see department publication REV-1831: Tips for reporting common expenses (Schedule C).
Tax Help Online and Over the Phone
The Department of Revenue offers help through its Online Customer Service Center. This online option provides taxpayers with answers to specific questions about a number of tax-related topics. It also provides an option to submit a question to a Department of Revenue representative through a secure, electronic process that is similar to sending an email.
In addition to online assistance, the Department of Revenue's Customer Experience Center is available by calling 717-787-8201. The call center is open 8 a.m. to 5 p.m. on weekdays. Taxpayers may also schedule a call at a time that is convenient for them.
Other valuable information on managing taxes as a gig worker in Pennsylvania can be found in the Department of Revenue publication, Starting a Business in Pennsylvania – A Guide to Pennsylvania Taxes.
Free tax forms and instructions are also available at www.revenue.pa.gov. You can also visit the department's pages on Facebook, Twitter and LinkedIn for helpful tax information.