Hidden Financial Struggles of the Gig Economy
Last year, 59 million Americans earned at least some of their income through freelance work. This means that nearly a third of the country’s working age population participates in the gig economy in some form. For every YouTuber pontificating about how hustle culture is destroying our society (even though said YouTubers are probably making some money off of their rants), there are ten What’s App groups where your gig economy colleagues exchange information about where to find the best gigs and how to live within your means on a freelancer’s income. If you feel like you spend all your time working, and even though you learned quickly how to avoid gigs that pay too little or too late, it seems like your debts keep getting bigger instead of smaller, you are not alone. Gig economy workers face some challenges that their W-2 employee brethren do not have to deal with. For advice about managing debt on a gig economy income, contact a Jupiter debt lawyer.
All Work and No Tax Refund
Regular employees, whether they work part-time or full-time, and whether they receive an hourly wage or an annual salary, have an advantage over gig workers in that employers automatically withhold taxes from employees’ paychecks. If you are an employee, then the amount of your paycheck that your employer deposits into your bank account after withholding taxes is yours to spend. Employees who receive a W-2 rarely have to pay much to the IRS when they file their income tax returns, unless they also have sources of income other than employment.
As for gig workers who receive a 1099, our employers do not withhold taxes, and the taxes you pay on gig work are higher than what you pay on proper employment. We know that we should set aside 30 percent of our freelance income for taxes, and we know that we should pay our anticipated taxes in quarterly installments. We try to do this, but the bills keep coming due, and the only way we can pay them is with money from our gigs. Therefore, at tax time, some of what was supposed to go to the IRS has already been spent on groceries. Many gig workers owe overdue taxes as a result of this.
Lenders Can Smell Your Uncertainty
To qualify for the best loans, you must show proof of income. Gig workers often have an inconsistent income, despite the fact that they are always working or looking for new gigs. Therefore, it is difficult for them to qualify for affordable loans. Many gig workers use buy now pay later (BNPL), which is affordable, but it does not improve your credit score, so it does not move you toward your goal of qualifying for a home mortgage or other desirable loan.
Work With a Debt Lawyer About Debt Management for Freelancers
A South Florida debt lawyer can help you if your debts keep piling up even if you spend every waking moment on freelance work. Contact Nowack & Olson, PLLC in Jupiter, Florida to discuss your case.