The IRS vs. Freelancers

Freelancers love their independence.

No office drama, no micromanaging boss.

Just them, their laptop, and a dream.

But the government doesn’t love when millions of workers aren’t operating under their thumb.

The gig economy is 38% of the U.S. workforce, but it’s one of the hardest-to-track segments of employment for the IRS.

That makes IRS tax enforcement difficult.

Three Ways the IRS is is Making It Difficult on Taxpayers in the Gig Economy

1. Lower 1099 Reporting Thresholds

Once upon a time, payment processors like PayPal only had to report transactions over $20,000.

Now, that threshold is $600.

Freelancers who never thought about tax compliance are suddenly getting 1099-K forms—and facing unexpected tax bills.

2. Worker Classification Confusion

If a freelancer’s work is "essential" to a business, they may have to be classified as an employee.

That’s bad news for companies relying on independent contractors.

Businesses that misclassify workers could face back taxes, penalties, and legal action.

3. IRS Audits

Freelancers and gig workers are in the IRS’s crosshairs thanks to new tax reporting rules and stricter enforcement.

That means freelancers who haven’t been reporting every dollar (or who don’t have their records in order) are at risk.

TL;DR: Key Takeaways for Your Clients

- Lower 1099 reporting thresholds mean more freelancers are getting tax forms they weren’t expecting.

- Worker misclassification rules could create expensive problems for companies using independent contractors.

Let's Talk...

Have you noticed confusion from your gig economy clients who are now receiving unexpected 1099s?

What about business clients with worker classification issues?

Let me know in the comments!