Expansion of the Gig Economy Warrants Focus on Improving Self-Employment Tax Compliance

The Deputy Commissioner for Services and Enforcement should develop a strategic plan to address tax administration for the gig economy, including the assessment and collection of self-employment tax, and consider developing initiatives such as pilots or soft notice programs geared towards gig economy workers with repeated noncompliance.

The Commissioner, Small Business/Self-Employed (SB/SE) Division, should revise the repeater codes used in AUR case selection to account for more taxpayer situations, such as taxpayers who have a long history of high-dollar discrepancies and taxpayers who have the same type of discrepancy every year but have never been selected to be worked by the AUR program.

The Commissioner, Small Business/Self-Employed (SB/SE) Division, should revise Internal Revenue Manual (IRM) procedures with additional information and examples to clarify when tax examiners should enter a note on the AUR system justifying the reason why they are screening out cases.

The Commissioner, Small Business/Self-Employed (SB/SE) Division, should evaluate case selection practices for Category 50 cases, such as the feasibility of systemically determining whether the income on line 21 is subject to self-employment tax, to reduce the current screen-out rate.

The Commissioner, Small Business/Self-Employed (SB/SE) Division, should consider programming changes in the AUR system to automatically populate the self-employment tax window (including situations in which taxpayers have negative numbers on their return) for electronically filed returns as well as add additional prompts and reminders concerning line 21 and the need to fill out the income identity code.