Uber Drivers, Airbnb Hosts, and CPAs: Your Role in the Sharing Economy
Tax and accounting pros take notice: there’s a large and growing crop of entrepreneurs with new revenue streams and no tax planning experience.
If you’ve ever ridden with an Uber driver or stayed with an Airbnb host, congratulations! You’re part of the sharing or peer-to-peer economy, which continues to grow at an amazing rate. Airbnb now has more than 2 million listings. Uber has more than one million active drivers. TaskRabbit — which connects consumers with freelance labor — grew revenues by 300 percent in the past year. While the concepts behind these companies and others in the sharing economy are simple and compelling, for the individuals providing the services, there is a hidden layer of complexity underneath the opportunity to generate income. This complexity typically raises its ugly head at tax time — in the form of penalties, taxes owed, and expenses not allowed.
Surprises for Former W-2 Workers
Someone who has always worked as a W-2 employee is likely not to be familiar with the tax implications of self-employment work as an Uber driver or TaskRabbit “tasker.” These folks probably are not yet adept at planning for and calculating estimated tax payments through the year. Nor is an Airbnb host likely to understand the underlying tax ramifications of deciding to offer meals and other services along with a place to sleep.
Avoiding Penalties and Overpayment
Most sharing-economy entrepreneurs know little about the longer-term implications of the decisions they make about how they conduct their business. The unlucky ones wind up paying more taxes than they should have or even penalties that could have been avoided.
The lucky ones are the individuals who rely on a trusted tax or accounting professional. They’ve discovered that turning to a CPA can help them:
- Choose the best form of self-employment or business structure for their tax situation
- Decide which expenses to track and how to track them efficiently
- Determine estimated tax payments
- Prepare accurate tax returns
- Implement strategies to take advantage of potential tax-saving opportunities
Know the Demographics
While tax and accounting professionals have traditionally pursued high net worth clientele, this new group of entrepreneurs represents an interesting and potentially lucrative niche for savvy CPA firms and sole proprietors. Uber drivers, Taskers, Airbnb hosts, and the like are a diverse group of individuals with challenging and complex real estate, self-employment, and small business needs.
Contrary to popular belief, it’s not just millennials who make up the sharing economy. In fact, seniors are Airbnb’s fastest growing demographic for hosts, expanding by 102 percent in 2015. And more Uber drivers are over 50 years old than are under 30 according to a study commissioned by Uber. That contradicts the stereotype of sharing economy participants being right out of college and unable to find a “real” job. Instead these potential clients are often experienced, highly educated professionals with a growing set of tax planning and compliance needs that CPAs can fulfill.
Be Prepared for Participants of the Sharing Economy
Having the right tools to support these new clients can help you attract and retain a whole new client base. Income Tax™ Planner, from Bloomberg Tax helps you navigate even the most complex planning scenarios while improving income and loss calculations and client visibility. Automated and accurate tax planning can help you guide your clients to make the most tax-advantageous decisions about their new businesses and revenue streams.