The rapid growth of platform-based gig work means more U.S. workers are earning income through self-employment. Unlike traditional wages, these earnings are generally not subject to tax withholding, although they are often reported to workers and the Internal Revenue Service (IRS) through 1099 tax forms. A new study examined what happened when the reporting threshold for many gig workers unexpectedly increased from $600 to $20,000.
Researchers from Carnegie Mellon University, Michigan State University, the University of Chicago, and the IRS conducted the study, which was published in the Journal of Public Economics. They investigated whether changes in information reporting affected how much income gig workers reported when filing their taxes.
In 2017, a policy change meant that many gig workers with low to moderate earnings suddenly stopped receiving 1099 forms for their platform work. Andrew Garin, assistant professor of economics at Carnegie Mellon University’s Heinz College and lead author of the study, said the change provided an opportunity to examine whether workers reported their income differently when their earnings were no longer independently reported to the IRS.
The researchers focused on a gap in information reporting for gig economy payments between $600 and $20,000 following the adoption of the 1099-K form, which is used to report certain third-party network transactions. They examined how the change affected individual tax-filing behaviour and the overall reporting of income earned through gig work.
To measure the effect, the researchers used state-level information returns from Massachusetts and Vermont, where the reporting threshold remained at $600. They merged these records with federal tax returns filed with the IRS. They then compared platform workers living within the same labour market but on opposite sides of the Massachusetts border, allowing them to assess how different reporting requirements influenced tax-filing behaviour.
The results showed a substantial effect. For every dollar in gig payments that was no longer reported on a 1099 form, workers reported 17 cents less in self-employment net earnings on their own income tax returns. The findings suggest that third-party information reporting can play an important role in encouraging workers to accurately report their self-employment income.
The researchers also used state-level filings to estimate the size of the national online platform workforce in 2017 and 2018. They calculated that approximately 770,000 gig workers did not receive information returns because of changes in third-party reporting practices by online platforms. As a result, they estimated that about $560 million in profits went unreported on federal income tax filings.
The findings could have implications as policymakers continue to modify information-reporting requirements for freelancers and gig workers. Emilie Jackson, assistant professor of economics at Michigan State University and a co-author of the study, noted that evidence on how these changes influence taxpayer behaviour remains limited. With recent rule changes meaning millions more freelancers may no longer be subject to 1099 reporting, the researchers say their findings provide insight into how reporting thresholds could affect tax compliance and federal revenues in the years ahead.
More information: Andrew Garin et al, The impact of third-party reporting on tax compliance: Evidence from gig workers, Journal of Public Economics. DOI: 10.1016/j.jpubeco.2026.105697
Journal information: Journal of Public Economics Provided by Carnegie Mellon University