If there’s something that new drivers (and plenty of experienced ones) tend to overlook is taxes.
We understand preparing your taxes can be intimidating. You have to find and compile your annual earnings, cut a check to the IRS, and spend months worrying if you filed everything correctly.
However, we’re here to help. Rideshare taxes as an independent contractor might seem scary, but they’re pretty straightforward. And when you factor in the exclusive tax deductions rideshare employees are entitled to, it can get exciting.
Let’s talk about taxes! (We promise it’ll be worth your while.)
Talk About Taxes
As a rideshare entrepreneur, you’re employed as an independent contractor. This means that you must file additional forms, and you must set aside money from your earnings. If you were a regular employee, your employer would withhold them for you.
From Uber itself:
“Unlike a traditional full-time or part-time job, Uber does not withhold taxes from your earnings. That’s why the government requires you to pay income tax and self-employment tax every year.” The Uber Partner’s Tax Guide
There are benefits to being an independent contractor, though. You can deduct business expenses from your earnings. Keeping track of your mileage and vehicle costs can add an excellent return.
Uber and Taxes
Tax filings for Uber drivers can require more paperwork than other employees. So let’s take a closer look at how the tax filing process for Uber works. These are the documents you will receive from Uber:
- Tax Summary: an unofficial report provided to every driver/deliverer with a breakdown of your annual earnings and deductible business-related expenses.
- 1099-K: Official IRS tax document that includes all on-trip gross profits. However, you will only get one if you made more than $20,000 and provided at least 200 rides.
- 1099-MISC: Official IRS tax document with a breakdown of promotion, referral, and other payments for the year.
The Tax Payment Process
We’ve outlined some steps to follow when looking to pay your taxes.
- Collect your 1099 Form – Rideshare drivers should receive a 1099 form from Uber by January 31st. This shows how much money you made and the fees Uber took from that amount. It will also display how many miles you’ve driven in the past year as a rideshare employee.
- Prepare an Expense List – Compile all of your expenses to maximize the return you get during the tax filing process. This includes money invested in improving your business, such as providing customers with water bottles, tire changes, and other expenses.
- Fill out the Schedule C and Schedule SE Forms – After you have compiled your tax deduction list, fill out the Schedule C and Schedule SE forms.
- Calculate Your Total Profit – Use your Uber tax information to calculate your total profit for the past year. Then, take the total amount you made and subtract Uber fees and your business expenses.
- Fill out Form 1040 – Once you’ve completed your 1099, fill out Form 1040 and pay your applicable taxes online or via mail.
As a rideshare driver, a couple of standard deductions are available to you.
- The Uber tax summary includes an “On-Trip” mileage line on Trip Mileage. You can use it to deduct the expenses of operating your vehicle. These include gasoline, oil changes, car registration, maintenance, insurance, depreciation, and lease payments. In addition, you can use the standard IRS mileage deduction or keep track of your miles.
- Off Trip Mileage: This is any business-related mileage, such as the ones you drove towards ride requests before rides were canceled and after dropping off passengers. However, you must keep careful track of your off-trip mileage records.
Other Tax Deductions
Anything you spend on maintaining and improving your Uber business can qualify as tax-deductible. This can include:
- Amenities for customers such as snacks and bottled water.
- City and airport fees
- Tolls for freeways, highways, and bridges
- Electronic toll transponder
- Business taxes and licenses
- Floor mats
- First aid kit
- Tire inflator and pressure gauge
- Portable battery jump pack
- Flashlights and flares
- Roadside assistance plans
- Office supplies
We hope we’ve covered all of your Uber tax-related concerns. If you have any further questions, let us know in the comments!