The majority of Gen-Z self-employed individuals, including freelancers and gig workers, are unaware of their obligation to pay taxes on a quarterly basis, with many feeling anxious about taxes and getting information about the topic from social media, according to a November survey.
Ninety percent of respondents admitted to feeling anxious when hearing the word “taxes.” Almost 30 percent of survey respondents said that no one explained to them about tax calculations.
While 40 percent were educated by parents about tax preparation, 15 percent learned it from their teachers. “None of this is from a lack of desire on the part of Gen Zers. Eighty-three percent believe they would save more money if they understood how taxes were calculated,” the post said.
Additional Tax Burden
The Lili survey comes as self-employed individuals were set to be subject to a new tax reporting rule starting this year.The requirement was the result of the American Rescue Plan of 2021, which changed the reporting threshold for third-party settlement organizations (TSPOs) like Venmo and Paypal. It requires every transaction with a value of more than $600 made via TSPOs to be reported to the IRS via Form 1099-K.
Earlier, only those who made over 200 third-party network transactions, with the total value of such transactions being at least $20,000, were required to make such reporting.
According to the Coalition for 1099-K Fairness, the new reporting rule would result in unnecessary burdens for people who do casual selling online as a side hustle.
The reporting requirement was introduced even though the IRS was said to have a backlog of 21.3 million unprocessed tax returns at the end of May 2022.
Doing Side Hustles
The ignorance about tax rules and new tax reporting regulations might be a challenge for the numerous Americans who increasingly do freelance work or side gigs for extra income.For 18 percent of respondents, selling items online was the most common side hustle, with 9 percent selling used clothing. Thirteen percent took up freelance jobs as side work.
The biggest reason for taking up a side hustle was said to be “for something to do and a bit of extra cash,” with 63 percent agreeing to the statement. Forty-four percent wanted to make ends meet while 28 percent were doing side hustles owing to decades-high inflation pushing up living costs.