Tax Time for Uber Eats Drivers and other Independent Contractors!

Are you a side-hustler? Do you make money doing Uber Eats or Door Dash riding sharing or selling products? If so, you need to hear this!

As an Uber driver-partner or product consultant, it’s important to know that you’re an independent contractor for these companies NOT an employee. This distinction is very important to understand during tax time. If you’ve ever worked for someone else, you probably received a paycheck every few weeks. It took care of three major things:

1. Your regular pay that you live off of from day-to-day

2. Taxes you owe to the federal and state government

3. Benefits. Depending on the employer, you might have received health care, retirement contributions, and vacation and holiday pay

Now that you’re self-employed – your own boss, tax time might look a little different for you especially if this is your first time ever dealing with self-employed income.

Being Your Own Boss!

First off before we dive into the conversation of what it means to be your own boss, let us say congratulation! You are your own BOSS! One of the most exciting aspects of partnering with driver app companies like Uber, Lyft, and Door Dash or selling products is that you’re not an employee. As far as each of these companies are concerned, you’re an individual in the business to provide products and services to consumers. This is commonly known as being an “Independent Contractor”. As an independent contractor, you are one of the millions of people who enjoy the “flexible work” lifestyle option and unlimited income potential that comes with it. Because of this, it’s important to understand how this impacts you during tax time. Let’s take a look!

As an Independent Contractor for companies like Uber, Lyft, or Herbalife, you’ll receive 1099s instead of a W-2. This 1099 form will be very different than your end of the year W-2. It will not include any kind of taxes or any other withholding. Here is a breakdown of the two 1099’s you’ll probably see:

Form 1099-NEC ( Non-employee Compensation) is a form used by businesses like Uber, Lyft, Door Dash, Herbalife to report payments made to you as an independent contractor, freelancer, or as some may say side-hustler. It’s also important to know that in some cases, you’ll receive two 1099’s – the other is a 1099-K.

Form 1099-K is mostly provided to Uber Eats or Ride Share partners used to report the total amount passengers paid for rides. Side note, The IRS does not require Uber any of these companies to issue a 1099-k if you processed fewer than 200 transactions or earned $20,000 or less in payments. Remember, you have to file an income tax return anytime your earnings is over $600.00.

Simply put, from an accounting standpoint, you are in charge of reporting all earned income.

So, What’s the Good news about being your own boss?

Filing Schedule C

Besides enjoying the flexibility, earning additional income, the good news is that as an independent contractor, you’ll most likely report your earned income on Schedule C, Profit or Loss form for Businesses. Since you are a business, you can report any business losses as you would business income. If you’re new to self-employment income, you are probably saying, ‘what are business losses?” Business losses on Schedule C are a list of business-related expenses incurred while providing services. For example, gas, mileage, phone, food, snacks, transportation, tolls – there’s a long list of things you can deduct while operating your business. Deduction help decrease the impact of self-employment tax if done accurately. Your business should rely on tracking the cost it takes to do what you do every day as an independent contractor.

If you would like to learn more about 1099 income and business deductions, at Prospective Bookkeeping and Taxes, LLC we’re always here to help you! Contact us today at 512-354-7878 or email us at info@prospectivebooks.com