Avalara, Inc., a leading provider of cloud-based tax compliance automation for businesses of all sizes, has officially published the results from its new survey* of gig economy workers.
According to certain reports, the stated survey covered online marketplace sellers, digital content creators and influencers, short-term rental hosts, and rideshare and delivery drivers, who are all now faced with a lower threshold for 1099-K income reporting to the IRS.
For better understanding, during November 2024, the IRS announced a three-year phase-in to the $600 threshold, beginning with a new $5000 1099-K threshold this tax year, then a follow-on reduction to $2,500 in 2026, and finally a $600 threshold during the 2027 tax season.
In that regard, Avalara report found that while 61% of respondents claim to be knowledgeable about Form 1099-K and its purpose, an equal 61% do not know that the 1099-K reporting threshold is lower this year and subsequent tax years.
Next up, the report discovered that more than 74% of gig workers revealed they cannot identify the payment threshold above which they would be required to report income to the IRS in 2025. In fact, only 18% surveyed could identify the correct threshold for 2026 and the final $600 reporting threshold for the 2027 tax season.
“Our survey data reveals the urgent need for basic knowledge and orderly direction on the part of gig economy workers to determine how best to comply with the lowered 1099-K digital payments threshold,” said Kael Kelly, General Manager at Avalara 1099 & W-9. “This scrappy segment of our economy demonstrates DIY drive in creating a living from engaging in multiple jobs, non-traditional work, and sometimes essential services that support how consumers want to buy and receive goods and services – and they’re now faced with the additional challenge of sorting out new, last-minute tax regulations and reporting requirements.”
The survey in question even saw contrasting predictions for how they would perform alongside new income reporting requirements. We get to say so because an estimated 37% of respondents reported that their business will be profitable following tax season. On the other hand, 36% responded that they’ll likely break even, whereas nearly 17% of respondents expect to lose money due to the IRS changes.
Moving on, more than one-third (37%) of gig workers surveyed said this is the first year they’re receiving a 1099-K. Topping that is a contingent of 21% of respondents who plan to open their tax professional wallet for the first time.
To make things even more complicated, another 75% of respondents have two or more sources of income, 45% have three or more, and 16% have four or more.
Hold on, there is more, considering we still haven’t touched upon how a larger chunk of the covered gig workers plan to move forward with work choices, payment transaction strategies, and handling tax-related responsibilities. This includes a set of 20% respondents who say they will quit one or more of their gig economy jobs in order to avoid crossing the $2,500 1099-K threshold next year. More than 19% of all respondents also plan to alter their earnings strategy, and 15% will be using tax software for the first time.
An estimated 20% respondents hope to take on more under-the-table work, with 15% switching to Zelle to avoid IRS reporting rules related to platforms like PayPal and Venmo.
A 40% said they’ll take on one or more gig economy jobs. Against that, almost 16% of survey respondents claimed they’re leaving the gig economy altogether and pursue a different work.
“Businesses of all sizes, including independent workers, need a fast, robust, easy, and affordable way to e-file 1099 forms, and that capability is within reach through modern cloud software,” said Kelly.
Founded in 2004, Avalara’s rise up the ranks stems from making tax compliance faster, easier, and more accurate, reliable, and valuable. The company’s tax compliance automation software solutions leverage 1,200+ signed partner integrations across leading ecommerce, ERP, and other billing systems to power tax calculations, document management, tax return filing, and tax content access. At the moment, Avalara serves 41,000+ business and government customers across 75 countries.
