Detroit bass player Grover “GT” Tigue knows too well about the wildly varying rhythms of the gig economy.

Tigue has been a musician for the past 21 years, but he saw his bookings crash for roughly a year during the pandemic.

“I didn’t start gigging in 2021 until about April,” Tigue said.

More work, including playing his bass guitar one September evening at the members-only Craft Cannabis Club in Detroit, picked up as the vaccines became more readily available.

But one thing the pandemic should have taught everyone who is a gig worker — musicians, dog walkers, delivery drivers, you name it — is that you must keep good records when it comes to your business, mileage, expenses and income.

“It’s the little things like that that we as musicians or gig workers don’t know,” said the long-time Detroiter.


Tigue studied accounting and finance at Olivet College in Olivet, Michigan, and once even made a 7-minute video in April 2000 to help younger musicians learn how to seek financial assistance and better understand taxes, track income, and record expenses.

“I try to be the squeaky wheel in my circle of people who are phenomenally talented,” Tigue said. “They don’t recognize how many things they can actually write off.”

Paperwork is needed at tax time — as Tigue learned well after boxes of records, including his business journal, were lost in a move.

“You need to get a good accountant.”

Gig work surprise: new tax rules, a higher tax bill

The downside of picking up extra gig work is that your tax bill might exceed what you’d imagine. Many times, people don’t set aside cash, pay taxes as they earn or know the complicated rules when it comes to income tax obligations.

Next year, many gig workers may be shocked as tougher tax reporting standards go into place and greatly expand how many 1099-Ks are issued to those earning extra money in the gig economy.

While workers should report their income, experts say, much taxable income falls through the cracks and goes unreported now in cases where there isn’t a 1099.


“What’s happened is that the IRS was focused on a W-2 economy and created a system that matched W-2s and 1099s and never totally focused on a cash-based ‘gig economy’ such as we are moving toward now,” said Richard Davidson, chair of the taxation and business law department at Walsh College.

“So, they are playing catch-up, trying to figure out how to raise compliance. Matching payments from payors is their best strategy,” Davidson said.

The tax change was part of the American Rescue Act signed into law by President Joe Biden on March 11.

What kind of paperwork do you see?

Many people may be familiar with a Form 1099-MISC that can involve payments of at least $600.

Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting, said the 1099-MISC is still used for things like rents, royalties, prizes and awards, medical and health payments and payments to attorneys.


Fantasy sports players, for example, can receive a Form 1099-MISC when they win money.

But those who work in the sharing economy are often seeing a new tax form, known as the Form 1099-NEC. That form reports non-employee compensation for the 2020 tax year and beyond. The form was designed to streamline income reporting and applies to nonemployee compensation of $600 or more.

Uber, for example, issues 1099-NECs to drivers who meet the income standard instead of the 1099-MISC that was issued in the past.

Even if you did not receive a 1099-NEC because you earned less than $600, you must still report your earnings.

Here come 1099-K forms

Under current income tax rules, if a person is paid electronically by credit card, debit card or third parties, such as PayPal, those payment networks must issue a 1099-K when the taxpayer is paid at least $20,000 or more and has more than 200 such transactions.

But that threshold lowers in 2022: If you make at least $600, that’s going to trigger a 1099-K.


As those working in the sharing economy receive more 1099s, they’ll report more of their income. The change will by impact many, including those who earn extra money working for app-based companies and those who sell items via online retailers like Etsy and eBay.

According to IRS Tax Gap studies, it’s estimated that 63% of income is misreported when third parties do not provide information to the IRS, such as with a 1099-K, according to a 2019 report on the gig economy by the Treasury Inspector General for Tax Administration.

Why some preach about taxes now

Davidson at Walsh College frequently brings up the tax-related challenges facing those who work in the gig economy to his students.

Many students have ideas for making money in a gig economy, such as painting custom pet portraits or teaching private violin lessons. But Davidson said they often don’t have a clue about recordkeeping and usually aren’t thinking through the tax implications.

It’s a passion topic for Davidson, former in-house corporate tax counsel for Chrysler.

“The goal is to get them thinking about the fact that we’re moving away from a W-2 economy. Everyone is multi-gigging.”


Davidson said he’d like to see more education focused on tax implications and recordkeeping issues, given that the gig economy is expected to grow.

The U.S. Bureau of Labor Statistics does not have a definition of gig economy or gig workbut has looked at various possible categories.

Many gig workers could fall into a group of about 5.9 million contingent workers — those who did not expect their jobs to last, according to 2017 data from the U.S. Bureau of Labor Statistics. That was 3.8% of those employed.

The data also identified 10.6 million independent contractors — or 6.9% of total employment.

The group could also include what’s called “electronically mediated employment” — work found via mobile apps that connect gig workers with customers and arrange payment for tasks.

In May 2017, the BLS said were 1.6 million such workers, accounting for 1% of total employment.


Why estimated tax payments may be needed

If you’re an employee receiving a regular W-2, your employer withholds Social Security and income taxes from your paycheck.

But Davidson notes that independent contractors must pay both the employer and employee share of Social Security taxes and pay income taxes during the year in the form of quarterly estimated tax payments on Form 1040-ES.

“Guess what? The IRS wants their money on a timely basis,” Davidson said.

If you underpaid throughout the year, either through insufficient withholding or not making estimated tax payments, the IRS can charge a penalty (with interest) for underpayment of taxes.

Antonio Brown, a CPA in Flint, Michigan, also works as a musician and gets paid as a 1099-NEC employee, with no taxes withheld.


“The biggest mistake that people in the gig economy make is not withholding or paying quarterly estimate taxes on the money that they make,” Brown said.

Income is subject to self-employment taxes in addition to federal, state, and sometimes local income taxes depending on the individual’s place of residence.

“The self-employment rate is 15.3% on the profits earned,” he said. “On top of that, you are responsible for the federal individual income tax rate.”

While some people realize they’re going to owe federal income taxes on their income, they don’t necessarily plan on self-employment taxes or consider making quarterly-estimated payments.

“I’ve had clients who’ve made $20,000 as a musician walk away owing over $4,000 in taxes for federal and state income taxes,” he said.

During the last quarter of the year gig workers can make catch up payments. The federal quarterly estimates for the current tax year are due April 15, June 15, Sept. 15 and Jan. 15, 2022.


What if you owe money?

Many people may not be prepared for a big tax bill.

“Some people may panic and not file, which is the worst possible result,” Davidson said.

The statute of limitations never expires on an unfiled return, he noted.

You also cannot ignore the 1099-K forms that show up during the tax season that report some of your income.

“If the IRS sees it, you better have it,” Davidson said.

Need help? The Internal Revenue Service has a “Gig Economy Tax Center” ( to spell out tax obligations. The site defines the gig economy as “activity where people earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website.”