2013-08-09

Co.Exist

Making Cash In The Sharing Economy? Get Some Help On Your Complicated Taxes

The sharing economy is great until tax time, because the IRS isn’t quite as excited about it as we are. A new site called 1099.is will help you make sense of all your forms and keep your money in your pocket.

The sharing economy, the collaborative economy, the freelance economy--whatever you want to call it, the economy of collaborative consumption has created a whole new class of freelancers that make their money shuttling people from place to place in cars, renting out their homes for vacationers, and putting together Ikea furniture for clueless renters. Sharing economy services like Airbnb and TaskRabbit are easy enough to join--it isn’t until tax season comes along that things start to get complicated.

Collaborative Fund, a venture capital firm which invests in companies that promote collaborative consumption, is working on a tool--dubbed 1099.is--to make it easy (well, at least easier) for freelancers in this new economy to file their taxes.

"When we talk to entrepreneurs in the sharing economy, we ask 'what are the biggest pain points?' A lot have run up against tax and accounting issues," says Craig Shapiro, the founder of Collaborative Fund. "No one entity is personally incentivized to solve it. Kickstarter has a site providing some tax guidance for Kickstarter creators, and Airbnb has done some work, but no one has stepped back and holistically tried to solve this."

The site, as Shapiro describes it, is "a rough attempt to at least provide some basic guidance" to understanding freelance tax issues. Created with help from Collaborative Fund’s law firm, Cooley LLP, the site offers answers to common questions in the new economy that may once have seemed esoteric: If you’re renting a part of your apartment or house while continuing to live in it, what portion of the expenses associated with maintaining the home for rental use are eligible for tax deductions? If you’re planning to use crowdfunding capital as the first step in building a company and want to pursue equity funding in the future, what type of company should you create? And if you have a resource (like a car) that’s used both personally and for resource sharing, how do you allocate the separate uses so that you pay the appropriate taxes for each one?

Shapiro emphasizes that the answers provided on the site are merely guidance--they’re not definitive (hence the disclaimer placed on every question and answer). "A number of people tried to discourage us from pursuing this because it is so grey, so case-specific. If you’re doing a Kickstarter project and I’m doing one, how that income is treated can vary greatly," he says.

The questions were generated from active participants in the new world of sharing. "We sat in a room with a Lyft driver and a Taskrabbit and a Kickstarter project creator and we just asked them what their questions are," says Shapiro. But anyone can add new questions to the website, which will be continually updated.

In some respects, the sharing economy has grown too fast for its own good--it’s more than a little problematic that people are running into these tax issues without much guidance. Says Shapiro: "I do think there’s a lot of excitement about the sharing economy, but it has outpaced the reality. A lot of the building blocks still need to take shape."

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1 Comments

  • Rick Falls

    Maybe we should embrace the FAIRTAX and then we can spend our time working on our business ideas instead of wasting our time satisfying a bunch of regulatory burdens and complicated laws that make us out to be criminals.