Understanding Your Status as an Independent Contractor
Professionals who do business via Thumbtack as considered as independent contractors for tax purposes. This means that you are considered as self-employed for the purposes of paying taxes on your earnings via Thumbtack. The platform will not pay taxes on your behalf. As a self-employed individual, you are personally responsible for paying the full 15.3% (12.4% Social Security and 2.9% Medicare) self-employment tax on your annual income.
You may also be required to make quarterly estimated income tax payments. See our blog post here for additional information and to find out if you are liable for them.
Deducting Your Business Expenses
As a self-employed Thumbtack professional, you are permitted to deduct all of the ordinary expenses of running your business. It is your responsibility to make sure that you keep track of all of the possible deductions that you can take. The tax deductible business expenses that you may be able to deduct include:
● The cost of Thumbtack Credits
● Your home office
● Supplies (fitness equipment, educational materials, and cooking supplies) that you purchase for customers
● Business use of a personal vehicle
● Tolls and parking fees
● The portion of your mobile phone use that is for your business
● Advertising (professional photography, paid ads, videography work) to promote your Thumbtack profile
● Travel expenses
Only a licensed tax professional will be able to determine the exact deductions that you are legally entitled to. If you aren't sure which deductions you are allowed, consult a qualified CPA to obtain assistance with preparing your taxes.
What About the Tax Forms?
If your earnings exceed $600 for the year, Thumbtack may send you a 1099 form. Make sure that you retain this 1099 form because you will need it to prepare your tax return.
The majority of self-employed individuals form 1040, U.S. Individual Income Tax Return. As a self-employed individual, you must attach Schedule C with your return.
Report Your Income and Expenses on Schedule C
Schedule C is used to report your income and expenses from your Thumbtack business.
Report your earnings from any 1099 forms you’ve received on gross receipts (line 1). If you have any other 1099 forms from any other sharing economy sites, you will need to sum the total from all of your 1099 forms and record the total on line 1.
Line 8 is where you should record your expenses related to advertising your Thumbtack profile.
If you use you home for business, you should calculate the deduction first by using Form 8829: Expenses for Business Use of Your Home and then enter the result on Schedule C.
After you've entered all your deductions, subtract them from gross income to get your net Schedule C profit or loss, on Line 31.
How to Earn More on Thumbtack
Once you understand how to file the tax forms as a self-employed independent contractor, it is time for you to use some methods to earn more from your Thumbtack business.
While there are many ways to spend more to find more customers on Thumbtack, including building up your Thumbtack profile and advertising, you can also earn more without directly providing services.
With the Thumbtack Referral Program, you can earn points for referring your friends and colleagues to Thumbtack. The more points you get, the higher your profile will rank and you will be more likely to get leads.
While the points won’t save you any money on the costs of using Thumbtack directly, earning more sales because of your higher ranking profile will improve your earnings. To make the most of Thumbtack, it is up to you to find ways to increase your earnings beyond simply providing services to customers.
This is just a general overview of what you can expect as a Thumbtack professional. When you know how to prepare for tax season, filing your taxes will be easier. If you have any additional questions, or you just need help with filing your Thumbtack business taxes, contact us. We are experts in the Sharing Economy and we are here to help.