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From Shortchanged to Lasting Change

Bruckner’s report spurs IRS action

By Jamie McCrary

Caroline Bruckner, Managing Director of Kogod's Tax Policy Center.

Caroline Bruckner, Managing Director of Kogod's Tax Policy Center.

Caroline Bruckner, Managing Director of Kogod's Tax Policy Center, isn't just about research and education. She’s about innovative—and impactful—change.

"There is ground-breaking research happening at Kogod that is having a big influence on tax policy makers," says Bruckner. "Our Tax Policy Center is the first of its kind to focus on issues specific to small business owners. People have recognized and responded to that."

Shortchanged, the Center's most recent publication authored by Bruckner, is a powerful example of this research. Written with the goal of developing a sustainable tax policy for small business owners in the sharing – or “on demand” – economy, Shortchanged presents startling data on this sector’s tax compliance challenges. The sharing economy includes individuals that utilize web-based platforms, like Uber, Airbnb or Etsy, to sell goods and services for profit.

The report’s survey data revealed that a majority of respondents, who were self-employed sharing economy workers, did not have the information they needed to successfully complete their tax returns. Nearly 70% reported that they received zero tax guidance from the platforms they worked with.

“Most of these people earn very little money doing this kind of work alone, and they are omitting important steps completing their returns that could lower their taxable income,” Bruckner explains. “They’re leaving money on the table. They’re getting ‘shortchanged.’”

Even more unsettling is the fact that, of the 518 survey respondents, 61% received no tax form for their platform work. This means that not only are many sharing economy workers getting shortchanged, but it’s more than likely that most of this income is never reported to the Internal Revenue Service (IRS). “This is one of the findings that makes this report so impactful,” says Bruckner. “The IRS has no way to know how much money they owe these people, and vice versa. This is inefficient, and we can do better.”

Bruckner isn’t the only one concerned with the pitfalls of the current tax system. The IRS has taken note, too.

In August, following Bruckner’s testimony in front of the U.S. House of Representatives’ Committee on Small Businesses, the IRS re-engineered parts of its website to respond to the sharing economy’s needs. The sharing economy resource center on IRS.gov provides tax form directions, tips, and contact information helpful to small business owners in the sector.

“This is huge,” says Bruckner. “It shows that the IRS is taking our research seriously, and that they are proactively addressing taxpayers’ concerns.”

The resource center also provides an overview of what the sharing economy is, and why it’s an important area of concern. The IRS notes that the sharing economy has “changed how people commute, travel, rent vacation places and perform many other activities,” and that they plan to address “tax issues and questions related to this emerging area.”

Shortchanged has implications affecting much more than a segment of the workforce. It reports on a major shift in the US labor economy, showing that more and more workers are becoming independent contractors and freelancers. In fact, some estimates project that by 2020, 40% of the workforce will be freelance, meaning they will face the same tax problems sharing economy workers do.

This trend could have critical consequences for the IRS and the US tax code. “If over half of the people in a non-traditional work setting like the sharing economy already don’t receive their tax forms, imagine when 40% of our population joins them,” says Bruckner intently. “The sharing economy is just the tip of the iceberg.”

Bruckner hopes to continue researching this trend, and dig deeper into how the sharing economy works. In particular, she plans to examine how baby boomers are utilizing it to save for retirement. “It’s a common myth only millennials are engaged in this labor area, which isn’t true,” she says. “Sharing economy activities also help supplement retirement funds.”

Bruckner is committed to continue affecting change by advocating for tax policies helpful to small business owners. Through focused and strategic research, she knows she, and the Tax Policy Center, can powerfully influence the tax world outside of AU. “With Shortchanged, we proactively showed the IRS that the sharing economy is important, and our labor economy is changing,” she says. “We are the only people doing that. And we’re doing it at Kogod.”