Gig Economy Glossary
202+ terms explained. Understand the language of the gig economy.
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1099 Form
IRS tax form reporting income paid to non-employees, commonly 1099-NEC for contractor pay or 1099-K for payment platforms.
1099-K
Tax form reporting payments from payment networks like PayPal or gig platforms when exceeding annual thresholds.
1099-NEC
Tax form for non-employee compensation of $600 or more, replacing Box 7 of the old 1099-MISC for contractor payments.
ABC Test
Employment classification test determining if a worker is an independent contractor based on control, business, and custom criteria.
Acceptance Rate
Percentage of offered deliveries or rides a gig worker accepts, which may affect access to certain programs or bonuses.
Active Income
Income requiring direct time exchange, like delivering food or driving rideshare.
Active Time
Time spent actively working on deliveries or rides, as opposed to waiting or deadheading.
Actual Expenses Method
Tax deduction method calculating actual vehicle costs (gas, repairs, depreciation) multiplied by business use percentage.
Adjusted Gross Income (AGI)
Gross income minus specific adjustments like self-employed health insurance and half of self-employment tax.
Algorithm (Gig Context)
Automated system determining order assignments, pricing, and driver prioritization on gig platforms.
Annual Report (State)
Required yearly filing for LLCs and corporations updating the state on current business information, often with a fee.
API (Application Programming Interface)
Technology allowing different software systems to communicate, used by apps to connect bank accounts and track expenses.
APR (Annual Percentage Rate)
The yearly interest rate charged on borrowed money or earned on savings, including fees, expressed as a percentage.
APY (Annual Percentage Yield)
The effective annual return on savings or investments including compound interest, showing actual earnings over a year.
Arbitration Clause
Contract provision requiring disputes to be resolved through arbitration rather than courts, common in gig platform agreements.
Articles of Organization
Legal document filed with the state to formally create an LLC, including business name, registered agent, and member information.
At-Will Employment
Employment relationship where either party can terminate at any time for any legal reason without notice.
Authorized User
Person added to someone else's credit card account, benefiting from that account's history on their credit report.
Background Check
Verification of driving record and criminal history required by most gig platforms before approval.
Base Pay
Minimum payment for a delivery or service before tips, set by the platform based on distance and other factors.
Batch Order
Multiple orders grouped together for delivery in a single trip, common on Instacart and DoorDash.
Batch Pay
Payment for a group of orders delivered together, common in grocery delivery platforms.
Bonus Depreciation
Additional first-year depreciation allowing 80% (2024) immediate deduction on qualifying property, phasing down 20% annually.
Bonus/Incentive
Extra payment offered by platforms for completing certain goals like number of rides, deliveries, or referrals.
Booking Fee
Fixed fee added to each transaction, separate from percentage-based commissions.
Boost Zones
Designated areas where delivery platforms offer increased base pay or multipliers during busy times.
Break-Even Point
When total revenue equals total costs, meaning no profit or loss. Important for evaluating gig work viability.
Cancel Rate
Percentage of accepted orders or rides that drivers cancel before completion.
Cancellation Fee
Payment to driver when customer cancels after waiting period, compensating for time and travel to pickup.
Cash Flow
Movement of money in and out of your gig business, important for managing variable income.
Checkr
Background check company used by most gig platforms for driver screening.
Cherry Picking
Selectively accepting only the most profitable orders based on pay, distance, and other factors.
Class Action Waiver
Contract provision preventing workers from joining together in lawsuits against the company, requiring individual claims.
Coinsurance
Your share of costs after meeting deductible, expressed as a percentage (e.g. 20% coinsurance means you pay 20%).
Commercial Auto Insurance
Insurance for vehicles used for business purposes, required or recommended for heavy gig use beyond platform coverage.
Completion Rate
Percentage of accepted orders or rides that are completed, important for maintaining platform access.
Compound Interest
Interest calculated on both initial principal and accumulated interest, causing money to grow exponentially over time.
Contract
Legal agreement outlining project terms, payment, deliverables, and responsibilities.
Contribution Limits
Maximum amounts allowed to be deposited into retirement accounts annually, set by the IRS and adjusted periodically.
Copay
Fixed amount paid for covered services like doctor visits or prescriptions, typically $20-50 depending on service.
Credit Utilization
Percentage of available credit being used. Keeping below 30% (ideally 10%) helps maintain good credit scores.
Customer Rating
Score given by passengers or customers after service, affecting driver standing and deactivation risk.
Dashcam
Camera mounted in vehicle recording trips, used for protection against false claims and accidents.
DBA (Doing Business As)
A registered business name that allows sole proprietors to operate under a name different from their legal name without forming an LLC or corporation.
Deactivation
Removal of access to a gig platform, usually due to low ratings, completion rate, or policy violations.
Dead Miles
Miles driven without a paying passenger or delivery, such as driving to pickup locations or returning after drop-off.
Deadhead
Driving without a passenger or delivery, not generating income. Term borrowed from trucking industry.
Debt-to-Income Ratio
Monthly debt payments divided by monthly gross income, used by lenders to assess borrowing capacity.
Deductible
Amount you pay out-of-pocket before insurance coverage begins. Higher deductibles mean lower premiums but more cost when using insurance.
Deliverable
Specific item or output provided to client upon project completion.
Demand Prediction
Algorithm-based forecasting of busy times and areas to help drivers plan.
Depreciation
Decrease in vehicle value over time, a major hidden cost of gig driving.
Destination Filter
Feature limiting ride requests to those going toward a specific destination, useful at end of shift.
Direct Deposit
Electronic transfer of earnings directly to bank account without paper check.
Dollar Per Mile
Key profitability metric dividing order pay by total miles (including pickup). Successful drivers aim for $1.50-2+ per mile.
Driver Supply
Number of available drivers in a market, affecting individual earning opportunities.
Driver/Worker Rating
Average score from customer reviews that affects standing, access to features, and potential deactivation.
Dynamic Pricing
Pricing that changes based on demand, time, and other factors, used by rideshare and some delivery apps.
Earned Income
Income from work including wages and self-employment, as opposed to investment income.
Earnings Guarantee
Platform promise of minimum earnings for certain periods or requirements, such as Grubhub's contribution pay.
Economic Reality Test
Federal test examining economic dependence to determine worker classification, considering multiple factors.
Effective Hourly Rate
True earnings per hour calculated by dividing net profit by total hours worked including unpaid time.
EIN (Employer Identification Number)
Tax ID number for businesses, sometimes used instead of SSN for payments.
Emergency Fund
Savings for unexpected expenses or income gaps, especially important for gig workers.
Estimated Taxes
Quarterly tax payments made by self-employed individuals to cover income and self-employment taxes throughout the year.
Expense Ratio
Annual fee charged by investment funds as a percentage of assets, directly reducing returns. Lower is better.
Expense Tracking
Recording business expenses for tax deductions, essential for maximizing gig worker tax benefits.
FICO Score
Most widely used credit score model, ranging 300-850, used by 90% of lenders for credit decisions.
Flexible Work
Employment allowing workers to choose their own hours, location, or workload.
Form 1040-ES
IRS form for calculating and paying estimated quarterly taxes. Gig workers use this to pay taxes throughout the year rather than a lump sum at filing.
Franchise Tax
State tax charged for the privilege of doing business in certain states, regardless of whether the business is a franchise.
Freelance Marketplace
Platform connecting freelance workers with clients seeking their services.
Geofencing
Virtual geographic boundary triggering actions when crossed, used by gig apps to track deliveries and restrict areas.
Gig App
Mobile application connecting gig workers with customers for services like rideshare, delivery, or tasks.
Gig Economy
Economic system where temporary, flexible jobs are common and workers are independent contractors rather than employees.
Gig Insurance
Insurance coverage for gig work activities, filling gaps in personal auto or liability policies.
Gig Worker Benefits
Healthcare, retirement, and other benefits that gig workers must arrange independently since they're not employees.
Good Standing
Status indicating a business entity has filed all required reports, paid all fees, and complied with state requirements.
GPS Spoofing
Manipulating GPS location data to fake your position, against platform terms and can result in deactivation.
Gross Earnings
Total income before any expenses or deductions, shown on platform earnings screens.
Gross Income
Total income received before any deductions or expenses are subtracted.
Hard Inquiry
Credit check that appears on your report and may temporarily lower your score, typically from loan or credit applications.
HDHP (High Deductible Health Plan)
Health plan with higher deductible ($1,600+ individual) that qualifies for Health Savings Account contributions.
Heat Map
Visual display showing areas of high demand, often with surge or bonus indicators.
Hidden Tips
Platform practice of concealing portion of tips above a threshold until after delivery completion.
Hobby Loss Rule
IRS rule limiting deductions if an activity isn't conducted with profit motive. If profitable in 3 of 5 years, presumed to be a business.
Home Office Deduction
Tax deduction for portion of home used regularly and exclusively for business, calculated by square footage or simplified method.
Hot Bag
Insulated bag for keeping food warm during delivery, often required or provided by delivery platforms.
Hot Spot
Area shown on gig apps with high demand or likelihood of getting orders/rides.
Hourly Earnings
Calculated earnings per hour worked, important for comparing gig work profitability.
Idle Time
Time waiting for orders while the app is on but no work is available.
In-App Navigation
Built-in navigation within gig apps, sometimes less accurate than dedicated GPS apps.
Income Diversification
Spreading income across multiple platforms or income sources to reduce risk.
Independent Contractor
Self-employed worker who provides services to clients without being an employee, responsible for their own taxes and benefits.
Index Fund
Investment fund tracking a market index like S&P 500, providing broad diversification with low fees for long-term investing.
Instant Cashout
Feature allowing drivers to transfer earnings immediately for a small fee.
Instant Pay
Feature allowing gig workers to cash out earnings immediately for a small fee rather than waiting for weekly payout.
Instant Pay Fee
Fee charged by platforms for immediate access to earnings, typically $0.50-$2.00 per transfer.
Invoicing
Sending bills to clients for completed work, essential for freelancers and some service providers.
Liability Insurance
Insurance covering damages or injuries to others, important for service-based gig work.
Liquidity
How quickly an asset can be converted to cash without significant loss of value. Savings accounts are liquid; real estate is not.
LLC (Limited Liability Company)
Business structure providing personal liability protection while maintaining tax flexibility.
Market Saturation
When too many drivers are active relative to demand, reducing individual earnings.
Marketplace
Online platform connecting buyers with sellers or clients with service providers.
Mileage Deduction
Tax deduction for business use of personal vehicle, calculated using standard mileage rate (67 cents/mile in 2024) or actual expenses.
Mileage Tracking
Recording business miles driven for tax deduction purposes, using apps or manual logs.
Milestone
Major checkpoint in a project, often tied to partial payment release.
Multi-Apping
Running multiple gig apps simultaneously to increase order opportunities and earnings.
Multi-Platform
Working on multiple gig platforms simultaneously to maximize income.
Navigation App
GPS application providing directions for pickups and deliveries.
NDA (Non-Disclosure Agreement)
Legal agreement preventing sharing of confidential information about a client's business.
Net Earnings
Take-home pay after subtracting expenses like gas, vehicle costs, and platform fees.
Net Operating Loss (NOL)
When business deductions exceed income, creating a loss that can be carried forward to offset future profits and reduce taxes in profitable years.
Net Profit
Business income minus expenses; the amount gig workers pay self-employment tax on.
Net Worth
Total assets minus total liabilities, representing overall financial position and wealth accumulation over time.
No-Show
When a customer doesn't appear for pickup or delivery after the waiting period.
Non-Compete Clause
Contract provision restricting workers from working for competitors for a period after ending the relationship.
On-Demand Work
Work available immediately when requested, without scheduled commitments.
Onboarding
Process of signing up and getting approved to work on a gig platform, including background check and training.
Operating Agreement
Internal document outlining LLC ownership, member duties, profit distribution, and operational procedures. Not filed with state but essential for protection.
Opportunity Cost
Value of the next best alternative foregone. Time spent on low-paying gig work has opportunity cost of higher-paying options.
Order Ahead
Restaurant feature where food is prepared before driver arrives, reducing wait time.
Out-of-Pocket Maximum
Most you'll pay for covered health services in a year. After reaching this limit, insurance covers 100%.
Passive Income
Income requiring minimal ongoing effort after initial setup, like car sharing or print-on-demand sales.
Payment Processing
System handling the transfer of funds from customer payment to worker earnings, involving multiple parties.
Payment Terms
Conditions specifying when and how payment is due, like Net 15 or 50% upfront.
Peak Pay
Additional pay offered by delivery apps during high-demand periods to incentivize drivers to work.
Peak Season
Times of highest demand and earnings potential, varying by gig type.
Per-Mile Rate
Earnings divided by miles driven, key metric for evaluating delivery and rideshare profitability.
Piercing the Corporate Veil
Legal concept where courts ignore LLC or corporate liability protection due to improper separation of personal and business finances.
Platform
Company providing the app and marketplace connecting gig workers with customers.
Platform Fee
Percentage or amount taken by gig platforms from payments, typically 10-40% depending on the platform.
Platform Work
Work mediated through digital platforms connecting workers with customers.
Premium Tax Credit
ACA subsidy reducing health insurance premiums for those with income between 100-400% of federal poverty level.
Prepaid Card (Gig)
Platform-issued card for driver expenses or customer order payments.
Prime Time (Lyft)
Lyft's version of surge pricing, shown as a percentage increase rather than a multiplier, applied during high-demand periods.
Priority Dispatch
Preferential order assignment given to high-performing or status-qualified drivers.
Profit Margin
Percentage of gross earnings remaining after expenses, showing true profitability of gig work.
Prop 22
California ballot measure classifying app-based drivers as independent contractors with some benefits.
QBI Deduction
Qualified Business Income deduction allowing eligible self-employed to deduct up to 20% of qualified business income.
Quest Bonus
Uber's bonus system rewarding drivers for completing a certain number of trips within a specified time period.
Quest/Challenge
Platform incentive requiring completion of a certain number of trips or deliveries within a timeframe for bonus payment.
Rating Threshold
Minimum customer rating required to remain active on a platform, typically 4.6-4.7 stars.
Reactivation
Restoration of platform access after deactivation, often following appeal.
Red Card
DoorDash debit card used for placing and paying for orders at some restaurants.
Referral Bonus
Payment for recruiting new workers or customers to a gig platform.
Registered Agent
Person or company designated to receive legal documents and official correspondence on behalf of a business entity.
Retainer
Ongoing payment arrangement where client pays set amount monthly for reserved time or services.
Revision
Changes or modifications requested by client to completed work, often limited in contracts.
Rideshare Endorsement
Add-on to personal auto insurance providing coverage during Period 1 (app on, no passenger) of rideshare driving.
Rideshare Insurance
Auto insurance endorsement or policy covering rideshare driving, filling gap between personal and platform insurance.
Right to Control Test
IRS test focusing on who controls how, when, and where work is performed to determine worker classification.
RMD (Required Minimum Distribution)
Mandatory withdrawals from traditional retirement accounts starting at age 73, calculated based on life expectancy.
Roth IRA
Individual retirement account with after-tax contributions that grow tax-free, with tax-free withdrawals in retirement.
Roth vs Traditional (IRA/401k)
Roth accounts use after-tax money with tax-free growth; Traditional uses pre-tax money with taxed withdrawals.
Route Optimization
Algorithm-driven directions to complete deliveries in most efficient order.
Safe Harbor Rule
IRS provision that protects taxpayers from underpayment penalties if they pay either 100% of last year's tax (110% if income over $150k) or 90% of current year's tax.
Schedule C
IRS form for reporting income and expenses from sole proprietorship or self-employment on your personal tax return.
Schedule Flexibility
Ability to work any time without fixed shifts, a primary benefit of gig work.
Schedule SE
IRS form used to calculate self-employment tax on net earnings from gig work and freelancing. Required when net self-employment income exceeds $400.
Scheduled Dash
Pre-scheduled time block for DoorDash delivery, securing the ability to dash during busy times when open scheduling isn't available.
Scope Creep
Gradual expansion of project requirements beyond original agreement without additional compensation.
Seasonality
Regular fluctuations in gig work demand based on time of year, weather, or events.
Section 179 Deduction
Tax provision allowing immediate deduction of the full cost of qualifying equipment in the year purchased rather than depreciating over time.
Section 199A Deduction (QBI)
Tax deduction allowing self-employed individuals to deduct up to 20% of qualified business income, reducing taxable income on pass-through income.
Secured Credit Card
Credit card requiring a cash deposit as collateral, designed to build or rebuild credit with responsible use.
Self-Employed Health Insurance Deduction
Tax deduction for health insurance premiums paid by self-employed individuals, reducing adjusted gross income.
Self-Employment Tax
Social Security and Medicare taxes for self-employed individuals, totaling 15.3% on net earnings.
Self-Rental Rule
Tax rule preventing conversion of passive rental income to non-passive when renting property to a business you actively participate in.
SEP IRA
Simplified Employee Pension retirement account for self-employed with contributions up to 25% of net income.
Service Fee
Additional fee charged by platforms to customers or workers for using the platform's services.
Sign-Up Bonus
Promotional payment for new gig workers who complete requirements within a specified timeframe.
Slow Season
Periods of reduced demand and lower earnings, requiring budget management.
Soft Inquiry
Credit check that doesn't affect your score, used for background checks, pre-approvals, and personal credit monitoring.
Sole Proprietor
Simplest business structure where individual and business are legally the same entity.
Solo 401(k)
Retirement plan for self-employed allowing both employee and employer contributions up to $66,000/year.
Stacked Orders
Multiple delivery orders assigned to a driver to complete in sequence, similar to batch orders.
Stacking (Orders)
Accepting multiple orders from different apps simultaneously, controversial practice.
Standard Mileage Rate
IRS-set rate per mile to calculate vehicle expense deduction, covering gas, maintenance, depreciation, and insurance.
Sunk Cost
Money already spent that cannot be recovered, which should not influence future decisions.
Surge Pricing
Dynamic pricing during high-demand periods that increases fares for rideshare passengers and pay for drivers.
Take-Home Pay
Actual money remaining after all expenses and taxes. The true measure of gig work profitability.
Tax Write-Off
Business expense that reduces taxable income, such as mileage, phone, and supplies for gig workers.
Tax-Loss Harvesting
Selling investments at a loss to offset capital gains and reduce taxes, then reinvesting in similar assets.
Tip Baiting
When customers promise large tips to get quick service then reduce or remove the tip after delivery.
Tip Transparency
Practice of showing full tip amounts before drivers accept orders, advocated by gig workers.
Top Dasher
DoorDash status for drivers maintaining 70%+ acceptance rate, 95%+ completion rate, and other metrics, providing priority order access.
Traditional IRA
Individual retirement account with tax-deductible contributions that grow tax-deferred until withdrawal.
Uber Pro
Uber's driver rewards program with tiers (Blue, Gold, Platinum, Diamond) based on points, offering perks like tuition and rewards.
Underpayment Penalty
IRS penalty charged when taxpayers don't pay enough estimated taxes throughout the year. Currently about 8% annual rate on the underpaid amount.
Upfront Pricing
Showing full trip price including destination before accepting, offered by some rideshare markets.
VantageScore
Credit scoring model created by the three bureaus as alternative to FICO, shown on many free credit monitoring services.
Variable Income
Income that changes from period to period, typical for gig workers.
Vehicle Costs
All expenses related to using a vehicle for gig work: gas, maintenance, insurance, depreciation.
Vehicle Inspection
Required check of vehicle safety and condition for rideshare and some delivery platforms.
Vehicle Requirements
Age, condition, and type requirements for vehicles used in rideshare and delivery gigs.
Velocity of Money (Gig Context)
How quickly gig workers can convert time into cash. Faster payment platforms increase money velocity.
Vesting
Process by which employees earn ownership of employer contributions to retirement accounts over time.
W-2 Employee
Traditional employee who receives W-2 form, with taxes withheld and employer-provided benefits.
Wait Time
Time spent waiting at pickup locations, sometimes compensated after a certain threshold.
Weekly Payout
Standard free payment schedule for most gig platforms, typically depositing earnings weekly.
Worker Misclassification
Illegally classifying employees as independent contractors to avoid taxes, benefits, and labor law compliance.
How We Research & Review
Our team includes CPAs, former gig workers, and financial experts who personally test platforms and verify earnings claims. We follow strict editorial guidelines to ensure accuracy and objectivity.
Important Disclaimer: This content is for informational purposes only and should not be considered tax, legal, or financial advice. Consult a qualified professional (CPA, tax attorney, or financial advisor) for advice specific to your situation.