Is Gig Work Considered Self-Employed?

The rise of the gig economy has created flexible opportunities, but it also raises questions about how workers are classified for tax purposes. The primary issue is whether a gig worker is an independent contractor, who is considered self-employed, or an employee. This classification is important because it dictates who is responsible for withholding and paying taxes on earned income. The Internal Revenue Service (IRS) provides specific guidelines to help make this determination.

IRS Rules for Worker Classification

The IRS uses a set of criteria to determine if a worker is an independent contractor or an employee by evaluating the entire relationship between the worker and the business. The factors fall into three categories that examine the degree of control and independence in the working arrangement.

The first category is behavioral control, which looks at whether the business has the right to direct and control how the worker performs the task. This includes the type and degree of instructions the business gives, such as when and where to work or what tools to use. It also considers the training a company provides; ongoing training about procedures and methods suggests employee status. If a platform dictates your hours or requires you to accept a certain percentage of jobs, this points toward employee status.

Financial control is the second category, focusing on the business aspects of the worker’s job. This involves analyzing who controls the economic aspects of the relationship. An important consideration is whether the worker has a significant investment in the equipment they use; a delivery driver using their own car has a greater investment than one using a company vehicle. Another point is the extent to which the worker can realize a profit or loss.

The final category examines the relationship of the parties, including how the worker and business perceive their interaction. Written contracts describing the relationship are considered, though they are not the sole determinant. The permanency of the relationship is also a factor; a relationship that is expected to continue indefinitely suggests an employer-employee relationship, while a project-based relationship is more characteristic of an independent contractor. The provision of benefits, such as health insurance, is a strong indicator that the worker is an employee.

Tax Forms You Will Receive

As a self-employed individual, your earnings are reported on informational forms sent by the companies or platforms you worked for. These documents record your gross earnings and are also reported to the IRS, serving as the starting point for calculating your income.

One of the most common forms is Form 1099-NEC, Nonemployee Compensation. Businesses are required to issue this form to any individual they have paid $600 or more for services during the year. You will receive a separate Form 1099-NEC from each client that meets this threshold, and the amount reported is your gross income from that source.

You might also receive a Form 1099-K, Payment Card and Third Party Network Transactions. This form is issued by companies that process payments between you and your customers. For the 2024 tax year, the reporting threshold is $5,000, but you should check for the latest IRS updates as this amount can change. The amount shown on Form 1099-K is the gross amount of all payment transactions, which can include fares, tips, and fees that were deducted by the platform before you received your payment.

Calculating Your Taxable Income

Once you have your gross income from your 1099 forms, you must calculate your taxable business profit on Schedule C (Form 1040). As a self-employed individual, you are operating a business and are entitled to deduct the ordinary and necessary expenses you incurred.

Common deductions for gig workers include vehicle expenses. You can either deduct the actual costs of using your car for business or use the standard mileage rate set by the IRS, which for the 2025 tax year is 70 cents per mile. Other deductible expenses include:

• The business-use percentage of your cell phone and data plan
• Supplies like delivery bags or cleaning materials
• Commissions or fees paid to the gig platform
• Any other ordinary and necessary business costs

The process involves subtracting your total business expenses from your gross income to determine your net earnings from self-employment. This net profit is the amount subject to both self-employment tax and federal income tax. This figure is carried over from Schedule C to your main tax return, Form 1040.

The Taxes You Owe as a Gig Worker

Your net earnings from self-employment are subject to two different types of federal tax. It is important to account for both self-employment tax and income tax for proper tax planning and payment throughout the year.

The first tax is the self-employment tax, which is calculated on Schedule SE. This tax is the self-employed individual’s version of the Social Security and Medicare taxes (FICA taxes) that employees and employers pay. The self-employment tax rate is 15.3%, which consists of a 12.4% component for Social Security and a 2.9% component for Medicare. For 2025, the Social Security tax applies to the first $176,100 of net earnings, while the 2.9% Medicare tax applies to all of your net earnings.

In addition to self-employment tax, your net business profit is also subject to federal income tax. This income is combined with any other income you may have to determine your total taxable income for the year. The amount of income tax you owe depends on your tax bracket and filing status.

How and When to Pay Your Taxes

Because you are self-employed, taxes are not automatically withheld from your paychecks. You are responsible for paying your taxes directly to the IRS throughout the year in what is known as a “pay-as-you-go” system. This is done by making quarterly estimated tax payments to cover both your self-employment tax and income tax liability.

You can use Form 1040-ES, Estimated Tax for Individuals, to calculate these payments. For 2025, the payment due dates are April 15, 2025; June 16, 2025; September 15, 2025; and January 15, 2026. If a due date falls on a weekend or holiday, the payment is due on the next business day. You can pay online through IRS Direct Pay or the Electronic Federal Tax Payment System (EFTPS), or mail a check with a Form 1040-ES voucher.

Making these quarterly payments on time helps you avoid a large tax bill and underpayment penalties when you file your annual return. The estimated tax payments you make during the year are then credited against your total tax liability.