The gig economy is integral to millions of Americans’ livelihoods, and just like the silent partner they are, the IRS wants its share. The IRS says the gig economy includes any “activity where people earn income providing on-demand work, services or goods,” such as ride-sharing and delivery services, running errands, and selling products online. That means if you earned money from Uber, Lyft, Postmates, Instacart, Etsy, or a similar company, you may be on the hook for federal income taxes.

Income from any job, other than as a W-2 employee, is subject to the 15.3% self-employment tax and income tax on the income. Both the income tax and the self-employment taxes owed must be paid to the IRS on a quarterly basis. You can pay it online at  www.irs.gov or mail the IRS a check with Form 1040-ES.

How to pay taxes on gig economy income

Business(es) that paid you for on-demand work are required to file a Form 1099-NEC reporting income they paid workers if the income exceeds $600 for the year. Note that Form 1099-NEC is a new form this year. Such income was previously reported on a Form 1099-MISC. You should receive copies of these forms by early February, which you can use to file your 2020 tax return.

If you don’t receive these forms, you’ll need to rely on your own payment records to report all net income earned from temporary or part-time sources — including cash — on your tax return. You’ll have to pay income taxes on your net earnings (your gross income minus any related expenses). Plus, if your net earnings are more than $400, you’ll also be responsible for the 15.3 percent self-employment tax on that amount.

If you plan to continue earning income from side jobs in 2021, make sure you know the due dates for paying quarterly estimated taxes so you don’t face penalties and a huge tax bill next year.