Federal Tax Authority Indicates Upcoming Strict Enforcement Towards Independent Contractors
The Internal Revenue Service (IRS) might be intensifying its scrutiny of freelancers, as a federal court has granted it permission to collect data from JustAnswer LLC regarding U.S. taxpayers who received remuneration via the platform.
U.S. District Court Judge Dolly Gee gave the green light to the IRS's request for a John Doe summons, which seeks information about individuals who haven't been named or identified in other ways by the government. The summons targets individuals who received over $5,000 annually from answering questions on JustAnswer between 2017 and 2020.
According to Deputy Assistant Attorney General David Hubbert in a Department of Justice (DOJ) statement, the surge in the gig economy has led to heightened concerns about tax compliance. Hubbert emphasized that this John Doe summons represents the DOJ and IRS's commitment to utilizing all available tools to ensure that all taxpayers, regardless of their income source, report and pay their taxes accurately. Those engaged in the gig economy should be cognizant of and comply with their tax obligations, he added.
JustAnswer did not promptly respond to a request for comment.
Thorough data on freelancers remains scarce due to the gig economy's fragmented and diverse character. Nonetheless, surveys suggest that many gig economy participants earn less than their state's minimum wage.
The DOJ and IRS did not specify if they were pursuing John Doe summonses for other platforms, but the statement did mention several other freelance platforms, such as Airbnb, Uber, Lyft, DoorDash, and Etsy.
In November, the IRS released fresh directives to freelance platforms, instructing them to supply the agency with information about taxpayers who made over $5,000 in 2024, over $2,500 in 2025, and over $600 in 2026 and subsequent years.
Previously, freelance platforms only had to furnish information to the IRS for workers who earned over $20,000 and engaged in at least 200 transactions. The new thresholds aim to make it more challenging for freelancers to evade paying taxes on their income.
IRS Commissioner Danny Werfel stated, "Just like their fellow Americans who earn income through conventional means, U.S. taxpayers who earn income through digital and other platforms constituting the gig economy must pay their due taxes." He furthered that the world is becoming progressively smaller for tax evaders, and the IRS will collaborate with its partners to vigorously enforce tax laws.
The increasing reliance on technology in the form of gig economy platforms has raised questions about future tax compliance. To maintain transparency and ensure accountability, the IRS is utilizing advanced technology to collect data from platforms like JustAnswer, intending to investigate tax liabilities.
