Study on impact of changes to information reporting on gig workers' behavior uncovers unreported income
Because of the recent rise of platform gig work, more U.S. workers are being compensated through self-employment. Their earnings are not subject to tax withholding but are generally covered by information reporting on Forms 1099. In a new study, researchers explored what happened when the reporting threshold for many gig workers suddenly rose from $600 to $20,000.
A study examining the effects of changes to information reporting on gig economy workers has revealed that many underreported their earnings. In 2017, a policy shift raised the reporting threshold from $600 to $20,000, causing numerous gig workers to stop receiving 1099 forms for their income. Led by Andrew Garin of Carnegie Mellon University, researchers from Carnegie Mellon, Michigan State University, the University of Chicago, and the IRS analyzed the impact using federal tax returns and state-level information in Massachusetts and Vermont.
For each dollar of gig payments not reported, gig workers reduced their self-reported self-employment earnings by 17 cents on their tax returns. This led to an estimated 770,000 gig workers not receiving information returns in 2017-2018, resulting in $560 million in unreported profits. The research highlights the potential implications for federal revenue and research on the gig economy.
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