Unlike traditional employees, gig workers usually receive Forms 1099 instead of W-2s, which means they’re responsible for their own tax withholdings, self-employment taxes and quarterly estimated payments.

The shift from employee to independent contractor requires you to adapt to new complexities in income reporting and tax planning. Additionally, gig workers often have diverse income streams, varying expenses and unique deductions that differ from traditional employment.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.   

Q: Can funds contributed to a GoFundMe campaign be claimed as a charitable deduction?

A: Only if the donation is made to a qualified 501(c) organization.

Q: If a taxpayer receives both a Form 1099-K and a Form 1099-MISC, isn’t there a chance of double-reporting the same income?

A: Unfortunately, yes. There have been cases where individuals received both forms for the same income.

Q: If I’m listing my property as a short-term rental using a website, why do I need to take the mortgage on the property into account?

A: Some mortgage lenders may not allow you to rent out a property that’s financed with a homeowner’s mortgage.

Q: Are funds received from a GoFundMe campaign taxable to the recipients?

A: GoFundMe payments are generally not taxable to recipients, but the organizer might sometimes receive a Form 1099-K.

To learn more about tax reporting for gig income, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.

Question: John is preparing to meet with two of his potential clients, Robert and Steve. Through their conversation on the phone, John learned that Robert owns a tax-exempt LLC and Steve is a minister who is responsible for the administration of his church and ensuring it complies with its reporting obligations. The two gentlemen are confused as to whether they need to file beneficial ownership information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN). They heard that all tax-exempt entities were exempt from BOI reporting requirements. What should John tell them?

Answer: Not all tax-exempt entities are exempt from BOI filing. John, as a tax preparer, should provide the two clients with the following information.

Beginning Jan. 1, 2024, the federal Corporate Transparency Act (CTA) requires certain types of entities to file a BOI report with FinCEN, a bureau of the U.S. Department of Treasury. The CTA does not distinguish between for-profit and nonprofit entities with regard to BOI reports. Generally, three types of tax-exempt entities qualify for the exemption; they are §501(c) organizations, §527 political organizations and §4947 trusts. If your tax-exempt organization is not one of the three types of exempt entities and meets the definition of a reporting company, you still need to file a BOI report.

Per CTA, every domestic corporation, LLC, or other entity set up in compliance with the secretary of state or any foreign entity formed under the law of a foreign country and registered with the state in the U.S. is required to file a BOI, unless they qualify for one of the 23 exemptions set forth in the CTA. [31 CFR 1010.380(C)(1)]

Given the scenario presented to John, if Robert has his own tax-exempt LLC (which is not one of the three types abovementioned), and was created by filing with a U.S. state, he will still need to file. For Steve’s church, he likely does not need to file a BOI report as it is a §501(c) organization.

To confirm entity’s exempt status, taxpayers should go through the questions and criteria for each type of exempt entity listed under BOI Small Compliance Guide v1.1 (fincen.gov) and Beneficial Ownership Information | FinCEN.gov.

Understanding the foreign earned income exclusion and its application is crucial because it involves more than just filling out a form; it requires a deep knowledge of eligibility criteria, including the bona fide residence and physical presence tests.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.   

Q: Is the foreign earned income exclusion amount in U.S. dollars?

A: Yes, the foreign earned income exclusion is calculated in U.S. dollars and is adjusted annually for inflation.

Q: Is rental income considered for the foreign earned income exclusion?

A: No, foreign rental income cannot be excluded under the foreign earned income exclusion as it is considered passive income, not earned income.

Q: Do you need to pay taxes in a foreign country to meet the bona fide residence test?

A: Not necessarily. No single factor is controlling. All factors must be considered to determine if the taxpayer qualifies.

Q: What if someone owns a home in the U.S. but rents it out?

A: One of the requirements for the foreign earned income exclusion is that the taxpayer’s tax home is in a foreign country. Owning a home in the U.S. does not automatically establish an abode in the U.S., especially if it is rented out.

To learn more about tackling Form 2555 and the foreign earned income exclusion, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.