Lisa Kiplinger

USA TODAY

Hey, Uber and Lyft drivers, did you know that the snacks you serve your customers are partially tax deductible? But the snappy clothes you wear to burnish your image with your clientele aren't. Those are just two tax tidbits that many joining the ranks of the on-demand, or "gig," economy should keep in mind. Lisa Greene-Lewis, CPA and tax expert for TurboTax, has several more:

Q: In today’s “gig” economy where more people are doing side jobs, or gigs, how does the IRS keep track of what people are earning?

A: People working in the gig economy typically receive either a 1099-Misc or 1099-K, IRS forms that summarize income earned from a platform such as Uber, Lyft or TaskRabbit. The IRS can keep track of that income because they receive copies of the same forms that taxpayers receive. According to the IRS, there were over 91 million 1099 forms issued last year, the highest number on record.

Tax news and advice

Q: Does every cent you make have to be claimed?

A: Yes, people are required to report all of their income, even if they do not receive a 1099 or other tax form. If you make money as a contractor, issuers are required to report compensation of $600 or more on form 1099-Misc. Form 1099-K, the form issued by credit card merchants to report payments processed on your behalf, should be issued if your gross payments:

Exceed $20,000, and

Exceed 200 transactions within the tax year



However, even if you don’t receive these forms and make under $600 you still need to report your income to avoid penalties for failing to report income.

Q: What are four things drivers for Uber, Lyft and other car services can deduct that they might not be aware of?

A: Every driver knows that mileage can be deducted, and it’s now easier than ever thanks to tools like QuickBooks Self-Employed, which automatically tracks every trip to maximize deductions. Here are four other deductions:

Portio n of car cost: If you purchase a passenger car or van for your business, you may be able to deduct the expense up to $25,000 in the first year you bought it, which is a huge surprise and money saver for Uber and Lyft drivers.

If you purchase a passenger car or van for your business, you may be able to deduct the expense up to $25,000 in the first year you bought it, which is a huge surprise and money saver for Uber and Lyft drivers. Food for passengers: Drivers cannot expense meals for themselves, but they can write off 50% of snacks or drinks provided to passengers.

Drivers cannot expense meals for themselves, but they can write off 50% of snacks or drinks provided to passengers. Car interest payments: Drivers can write off interest on car loan payments, but only the business portion (e.g., 60% of the interest if the car is used 60% of the time for business and 40% for personal use).

Drivers can write off interest on car loan payments, but only the business portion (e.g., 60% of the interest if the car is used 60% of the time for business and 40% for personal use). Parking and tolls: Drivers can deduct parking fees and tolls that relate to business driving. For example, if picking up a client requires a driver to pay for parking, this expense is eligible for deduction.

Here are your odds of an IRS tax audit

Q: How about one or two that they might try to deduct but shouldn’t?

A: One common thing that self-employed people may try to write off is clothes. For example, an Uber Black driver may want to write off the suit he wears while driving. However, unless the clothing is something like a uniform that cannot be worn in public, then it is not an admissible deduction. The only time clothing can be a deduction is if it’s an actual uniform or protective clothing that you’re required to wear for work and it is not something you would wear every day.

Another thing that people may be tempted to claim as deductions are traffic and parking tickets, and these shouldn’t be claimed. Even if you get the ticket while driving for work or on a business trip, any tickets, fines or penalties you incur are not tax-deductible.

Q: What are a few things all people with side jobs need to be aware of when filing their taxes?

They need to be aware that they are now self-employed, but just because they are working in the gig-economy there are no new tax laws especially made for them. The tax laws are the same whether you are in the gig-economy or you have your own business doing something like, for instance, freelance writing.

They may be able to take deductions that they would not be able to as a W-2 employee. Some they may not even be aware of like being able to deduct health insurance premiums without having to itemize deductions and being subject to the 10% threshold (7.5% if you are 65 and older).

TurboTax has been helping self-employed taxpayers do their own taxes for over 30 years.

Keeping thorough and accurate records is important in case they ever have to prove their tax deductions.

Q: What should new freelancers do starting now to be better off next year?

A: The biggest thing you can do to start next year off on the right foot is to get organized, start properly documenting all your expenses and keep clean records. There are multiple ways to do this — for example, you could: