What Happens When The IRS Does Not Share with the Sharing Economy?
As children we all learn that sharing is a good thing. We shared our candy and our lunches and our toys. Yet, when we become adults, sometimes sharing gets reprogrammed out of our systems. Sometimes those who make it to powerful positions in government are not inclined to share. I’m not just making this up.
In a recent article published on TaxNews.com it was reported that, “During a recent hearing of the US House of Representatives Small Business Committee, the National Taxpayer Advocate Nina Olson said that the Internal Revenue Service (IRS) has not been helping American entrepreneurs to navigate tax rules and regulations in the sharing economy.”
While the sharing economy, which includes AirBnB, Uber, and others continues to grow at a record pace the IRS has yet to address the tax rulings for these emerging industries.
They leave it to the individual entrepreneurs to figure it out for themselves. That is an enormous number of people left to figure things out on their own.
According to the article on TaxNews.com, “The hearing’s advisory information noted that 4.2 percent of adults, or 10.3million people, earned income on the platform economy (including online intermediary sites such as Uber, Etsy, Lift, and AirBnB) during the three-year period from October 2012 to September 2015; a 47-fold growth over the three-year period.”
Regular taxpayers can’t keep up with the changing IRS rules, let alone an emerging industry that presents new challenges to the tax code.
As the article states, “Despite that growth, it was pointed out that “surprisingly little has been done to understand the tax compliance challenges this new frontier presents, or how it impacts Treasury and IRS’ ability to fairly and efficiently administer the US tax code. Most of these new entrepreneurs do not have any experience with the relevant tax record-keeping and business filing obligations.”
If you are among the sharing economy entrepreneurs who are clueless about how to file taxes don’t worry, you’re not alone.
“It was concluded that “these workers represent a rapidly-growing class of small business owners whose needs have largely been ignored by Treasury and the IRS. … Many fail to file altogether. A significant number face potential audit and penalty exposure for lack of compliance with tax rules they don’t understand.”
It comes as no surprise that “When the IRS is behind the times, it puts small businesses behind the eight ball,” as was stated in the taxnews.com article. And here’s the real kicker. “many on-demand companies say they would gladly provide tax compliance training, but they don’t because they are afraid the IRS will reclassify their relationship and subject them to whole new host of regulations and obligations,”
The saddest part is the following,”If a person working in the sharing economy called the IRS toll free line today, he or she would hear a recording saying the IRS is not answering any tax law questions after April 15th, so please check [the IRS website],”