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Income Verification in a Gig Economy

What exactly is a gig economy? 

A gig economy? You may be asking yourself what is a gig economy exactly? By Wikipedia’s definition, a gig economy is one in which workers are independent contractors, online platform workers, contract firm workers, on-call workers and temporary workers. Gig workers enter into formal agreements with on-demand companies to provide services to the company’s clients. Examples of such on-demand companies include Door Dash, Uber, UberEats, Lyft, Instacart – just to name a few. The COVID-19 pandemic caused this type of employment to soar – in addition to its burgeoning popularity prior to the pandemic. In this workforce, employees don’t have to wait for interviews or to be chosen for an employment opportunity.  Peer-to-peer payment apps, including Venmo, Cash App and PayPal, are important to examine when determining income for eligibility as these payments may be considered asset income if the total cash value is greater than $5,000 annually. 

How can you verify income from a gig economy to satisfy regulations/ensure compliance for LIHTC/HUD and other subsidized housing programs? 

Tracking “self-employment’” can be tricky- just ask the IRS! So how do we track this new type of employment to satisfy tenant files? The employee is self-employed and a 1099 will be issued at tax time and no “traditional” pay stub is issued from an employer. All time is usually tracked electronically through an app on the smart phone and even though there is no “paystub” per se, the individual can provide a printed statement for all hours worked and pay received in the current year. Per Ms. Jennifer Brown, copies of income taxes filed also provide information to where the applicant or resident’s income can be compared with the information, i.e., the printout or verification that was completed via third party. The burden of the third party verification usually will have to be provided by the applicant/resident as places such as www.theworknumber.com are not usually going to be useful in these circumstances. According to Ms. Jennifer Brown, who represented Communities of Tomorrow, it is recommended that all policies are clearly spelled out in the agency’s compliance manuals. 

What are some potential issues with income verification for employment in a gig economy?

Fraud is almost always a possibility in any federal program, and in a gig economy it is certainly a possibility. There is a greater burden on employees/residents to ensure all information is being collected. For example, if a potential resident/applicant receives monies from Cash App, for compliance purposes an entire printout of the last year’s history is needed and not just a screenshot of the monies that were sent. Another barrier is understanding your audience. According to Ms. Brown, whoever is conducting the interview with the resident/applicant must be aware of their audience and relay the information in such a way that the applicant/resident understands. One major issue here is the staffing needed to ensure proper verifications are conducted. HUD has decreased its workforce by approximately 14.4%, and likewise, Rural Development (RD) has decreased its workforce as well. 

What is the future of the Gig Economy?

The gig economy appears to be here to stay. The COVID-19 pandemic propelled the great resignation, and workers enjoy the flexibility these types of jobs afford. According to Indeed, the number of global gig workers is expected to rise to 78 million in 2023. 50% of freelancers are skilled workers in fields like IT, programming, counseling and marketing. 36% of freelancers freelance as a full-time job. 86% of freelancers think the best days for freelancing are still to come.    Hopefully, there will be some clearer guidance issued from HUD on calculating this type of income in the years to come; however, since there is no clear guidance, it is imperative that clear policy is developed for how each individual agency will evaluate/calculate the income.    

FOR MORE INFORMATION: 

https://communities-tomorrow.org/

https://www.taxcredithousinginsider.com/article/four-dos-donts-calculating-income-gig-economy-jobs

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