Court Authorizes Service of John Doe Summons for IRS to Seek Identities of U.S. Taxpayers Who Participated in the “Gig Economy” Via a Digital Platform

A federal court in California entered an order on Monday authorizing the IRS to serve a John Doe summons on JustAnswer LLC, seeking information about U.S. taxpayers who were paid for answering questions as “experts” during the years 2017-2020. The IRS is seeking the records of individuals who were paid by JustAnswer, which operates a digital platform through which members of the public can pay to have questions answered by professionals such as doctors, lawyers, veterinarians, engineers and tax professionals. JustAnswer is headquartered in Covina, California.

The “gig economy” is where people earn income providing on-demand work, services or goods through a digital platform like a website or an app. Well-known examples of such platforms include Airbnb, Uber, Lyft, DoorDash, Etsy, Handy and TaskRabbit. The gig economy is a recent phenomenon associated with the increased prevalence of smart phones and their applications, facilitating the development of online marketplaces and platforms in which individuals can connect to obtain and offer goods and services. Digital platforms commonly serve as intermediaries, connecting sellers or service providers with customers while also processing payments. In the court’s order, U.S. District Judge Dolly M. Gee for the Central District of California found that there is a reasonable basis for believing that U.S. taxpayers who were paid by JustAnswer to answer questions as experts may have failed to comply with federal tax laws.

The court’s order grants the IRS permission to serve what is known as a John Doe summons on JustAnswer. There is no indication that JustAnswer has engaged in any wrongdoing in connection with its digital platform business. Rather, the IRS uses John Doe summonses to obtain information about individuals whose identities are unknown and who possibly violated internal revenue laws, such as by not reporting income they received. This John Doe summons directs JustAnswer to produce records identifying U.S. taxpayers who have used its platform to earn income, along with other documents relating to their work.

“The gig economy has grown in recent years and with it, the concern for tax compliance issues has increased,” said Deputy Assistant Attorney General David Hubbert of the Justice Department’s Tax Division. “This John Doe summons demonstrates that working with the IRS we will use all the tools available to us to ensure that no matter how U.S. taxpayers earn income, they are properly reporting it and paying their taxes. Those who choose to be on the forefront of the gig economy must be aware of, and abide by, all their tax obligations.”

“Like their fellow Americans who earn income through traditional means, U.S. taxpayers who earn income from digital and other platforms that comprise the gig economy need to pay their fair share of taxes,” said IRS Commissioner Danny Werfel. “The world is getting smaller for tax cheats, and we will work collaboratively with our partners to vigorously enforce the nation’s tax laws.”

The IRS Small Business Self-Employed Division and IRS Office of Fraud Enforcement assisted with the investigation that led to this case.

The Justice Department and the IRS are committed to ensuring that taxpayers abide by all federal tax laws. Federal law requires U.S. individual taxpayers to pay taxes on all income earned worldwide. Individuals must report all income earned from the gig economy on a tax return. This includes income from part-time, temporary or “side work”; income not reported on an information return form (like a Form W-2 or 1099) or other income statement; or income paid in cash, property, goods or digital assets.

The Tax Division reminds gig economy workers that the IRS has information and tips for how they can comply with their tax obligations. The IRS also has guidance for digital platform providers about their tax reporting and filing requirements.