If you earn money by driving for a rideshare or food delivery service, you may have to pay income tax on that money. There are a few things to be aware of if you want to minimize your expenses and avoid making mistakes with your income tax when driving for companies such as Uber, Lyft, Grub, or Postmates. First, keep track of all of your expenses, including gas, maintenance, and repairs for your vehicle. Second, be aware of the tax implications of your earnings, and make sure to set aside money for taxes accordingly. Finally, take advantage of any opportunities to save money, such as sign-up bonuses or referral programs. You could end up losing money driving for a food delivery or rideshare company if you’re not careful with your expenses and time. Some studies suggest that as many as 30-40% of drivers end up in the red after factoring in their costs, including income taxes.
Remember that you have to pay taxes on the money you earn from these services. If you are a 1099 contractor, you will need to plan and pay your taxes yourself as the rideshare companies do not withhold that money from your payments. There are a few other mistakes that can be made when you are filling out your tax form. Here are some tips on how to avoid making mistakes.
Don’t rely on Uber, Lyft, Postmates or Grubhub to count your mileage
Rideshare companies, such as Uber and Lyft, use GPS to track how many miles you drive with passengers in your car. It does not track the number of miles driven when dropping off one passenger and picking up the next. The distance, expense, and time you spend on traveling can be significant, especially if you live in a rural or suburban area. The IRS allows you to deduct the miles you drive for business as an expense.
If you didn’t pay attention to the distance between passengers, you would miss out on a major source of tax savings. There are several apps that allow you to keep track of how many miles you drive over a certain period of time, such as Hurdlr, MileWiz, Gridwise, and TrackMyDrive. Many of these Rideshare apps also have other benefits, such as tracking your expenses as well as your mileage. There are a number of apps available that can help gig workers track their mileage for tax purposes. This can be a helpful way to stay organized and ensure that you are getting the most deductions possible.
Don’t lose those receipts
As a rideshare driver, you can deduct more than just the mileage between passengers. In addition to the cost of the vehicle, you can also deduct other business-related expenses. You can get a lot of expenses related to your car deducted from your taxes, including things like floor mats, tool kits, and oil changes or repairs. As a rideshare driver, you will need to keep receipts of your expenses.
The receipts are important not only for keeping track of your spending, but also for proving to the IRS that your expenses are legitimate. If you are an Uber or other rideshare driver, you can deduct 54.5 cents per mile driven when you file your taxes. Keep track of your receipts to get the most accurate deduction.
Don’t neglect to understand what business expenses you can write off
You should save receipts for items that you might return or exchange. This means that any expenses you incur while running your rideshare business can be deducted from your taxes. These are some of the recurring expenses that you need to take into account when you drive for a living. You should learn about the different kinds of expenses you can deduct.
As a contractor, you will need to file a 1040 form with the IRS at the end of the year in order to report your income and pay taxes on it. This means that any money you spend on your rideshare (such as gas, car repairs, etc.) can be deducted from your taxes. It is important to keep your receipts in case you need them to prove how much money you have spent. If you use the standard deduction, you may not need them as much, but it is still a good idea to keep them. There are a few different ways you can file your taxes for free. The IRS website has a section where you can file your taxes electronically for free. There are also commercial software providers, like Quicken, that have free versions of their software that you can use to file your taxes.
Get professional help completing and filing income taxes for driving jobs
Many people who work for companies such as Uber, Lyft, Doordash or Grubhub have a low to moderate income and are working as contractors to get extra money. There are a number of free income tax filing services that help even families who make a moderate income, and rideshare drivers (among other people) can get help completing and filing their state as well as federal taxes.
Volunteers and professionals who are experts in their field meet with low to moderate income clients to answer any questions they may have. The IRS Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) programs offer free tax help and e-file for taxpayers who need assistance preparing their own tax returns. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals. There are many programs and charities that can help with taxes. There are a number of programs that offer free tax preparation services for households with lower incomes. These programs can help you save money on tax preparation fees, and they can also help you ensure that your taxes are filed correctly.
You need to plan for and pay income taxes as a rideshare driver
The number one mistake that contractors make is not having a clear understanding of the job that they are doing. This can lead to them not being able to do the job properly, or not being able to complete the job at all. If you work for a rideshare company as an independent contractor (not as an employee), you will need to pay state and federal income taxes. The money you receive from a rideshare company is not all yours – they do not deduct your taxes such as social security, Medicare (FICA), state or federal taxes.
A key point to remember is not to spend all your money each time you get paid from companies like Lyft or Uber. Some of your income should be set aside for quarterly or annual tax payments. The percentage of your income that goes towards taxes will vary based on many different factors, such as whether you file your taxes as an individual or as a household, your total household income, the deductions you are eligible for, and whether you have children. You should save 10-25% of your income from ridesharing to pay for future taxes.
Don’t forget to make quarterly payments as a 1099 contractor
When you are a rideshare driver, you are technically running a small business. This means that you are responsible for your own taxes, expenses, and other business-related costs. Since you do not have an employer who will withhold taxes from your wages for you, you are responsible for making sure that you pay your taxes on time. Since you are a contract worker for Grubhub, Postmates, or Uber, you will need to do your own taxes and account for associated costs. They don’t take out taxes for Social Security, state, or federal income. You will be responsible for tracking and paying your own expenses as an independent contractor.
If you have a second job driving for a rideshare company and you already filled out a W-4 for your first job, you can change the withholdings on the first job to make sure your rideshare income is also covered by taxes. If you earn money from driving, you need to pay estimated taxes every quarter. If you do not pay the required amount of money by the end of the year, you will be charged a penalty.
Don’t deduct rideshare expenses twice
This means that you should not deduct any other expenses related to your business in addition to the standard 54.5 cents per mile. You can either do an itemized deduction for things like gas, car maintenance, insurance, and repairs, or you can do a standard deduction, but you can’t do both. Do not count the same expenses twice if you drive for both Doordash and Ubereats.
Bottom line on rideshare income taxes
Working for a rideshare or food delivery service is a good way to make some money in a pinch. You should think of your blog as a business. This will help you to be more successful in the long run. When drivers take into account income taxes, expenses for things like car maintenance, and other costs, they often end up losing money. The hourly wage at this job is so low, it might be better to get a job elsewhere.
Filing your state and federal government income taxes can be time-consuming and difficult, but it’s important to do it correctly. Be on the lookout for the many mistakes and potential errors on the list above. Rideshare drivers can get help from non-profits and the government to file and complete their tax forms.