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Taxation Tips for Uber, Lyft, and Other Automobile Sharing Drivers

Updated for Tax Year 2021 • November 27, 2021 12:46 PM

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OVERVIEW

When you're a driver for a ride-sharing company such equally Uber, Lyft, or other car sharing service, the about important thing to sympathise about your taxes is that you are probably not an employee of a ride-sharing visitor. Drivers for these companies are commonly independent contractors, a fact that has tax implications, both at filing time and twelvemonth-circular.

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You're the boss AND the employee

Beingness an independent contractor means that y'all're self-employed . As far as the ride-share company is concerned, you're the owner of a separate business organization that information technology uses to provide driving services. Then when you receive a payment, sympathize that it's non a traditional "paycheck," and probable no taxes accept been taken out.

It's up to you to accept care of federal and state income taxes, besides as Social Security and Medicare. Combined, these taxes tin easily attain 30% to 50% of your income, so make sure to set bated money to pay them.

If you're accepting ride-sharing fares more occasionally, you may be required to file quarterly estimated income taxes. At tax-filing flavour each spring, yous'll be reporting your self-employment income and expenses on Schedule C, likewise as filling out Schedule SE for cocky-employment tax if your internet income from the work is $400 or more.

Tax deductions for your car

Since you're an independent business concern owner, but about any money you spend on your gig equally a ride-share driver will exist a tax-deductible business organization expense. The commencement thing that probably comes to listen is your motorcar. In that location are 2 ways to accept a deduction for the concern use of your motorcar:

• Deduct the bodily expenses of operating the vehicle for business, including gas, oil, repairs, insurance, maintenance and depreciation or charter payments.
• Accept the standard IRS mileage deduction. As of 2021, the rate is 56 cents per mile driven for business organization use.

If you use your car for both ride-sharing and personal transportation, y'all can deduct simply the portion of your expenses that apply to the business utilize. And whichever type of deduction y'all claim, it's critical that you go on thorough records. The IRS could disallow any tax deductions you lot can't support with:

• Receipts
• Mileage logs
• Any other documentation

Other tax deductions for ride-share drivers

Commissions yous pay to the ride-share company are a business expense, as is whatever price yous may have to pay for engineering science installed in your car. Other tax deductions include:

• Water, gum or snacks for passengers
• Tolls and parking fees

In add-on, ride-sharing companies typically require apply of a smartphone.

• The portion of your mobile phone expenses attributable to your ride-share work can exist used to reduce your cocky-employment income.
• For simplicity'due south sake, information technology may brand sense to have a dedicated phone for work.

Making sense of your 1099 forms

As a contractor, you won't get a West-2 form from your ride-share operator, just you likely volition receive ane or more 1099 forms. Ride-share companies generally distribute these forms according to the same criteria:

• Payments for processing y'all customers' payments are reported on Course 1099-G. The amount shown in Box 1a of this course is all the money that the ride-share operator collected from customers for rides that you provided.
  • This likely will be more than than y'all actually received in payment, since it includes the ride-share company's commissions and other expenses. Your ride-share operator will provide you a tax summary yous can employ to translate the 1099-K information into some of the income and expenses to report on Schedule C.
• Payments for other activities, such as referrals or non-driving-related bonuses, are reported on Form 1099-NEC (1099-MISC in prior years). This coin is income to written report on Schedule C.

If the ride-share operator processed more than than 200 transactions and $20,000 in payments for you, then yous should go a 1099-M; similarly, if your not-driving income was less than $600, you might not get a 1099-NEC. Fifty-fifty if y'all don't go any 1099s, however, yous are responsible for reporting and paying taxes on all the income yous receive.

Under the American Rescue Plan, changes were made to Class 1099-1000 reporting requirements for third-party payment networks like Venmo and Cash App that process credit/debit card payments or electronic payment transfers. The change begins with transactions starting January 2022, so it doesn't impact 2021 taxes. Beginning with tax yr 2022 if someone receives payment for goods and services through a 3rd- party payment network, their income will exist reported on Form 1099-Grand if $600 or more was processed equally opposed to the current Form 1099-K reporting requirement of 200 transactions and $twenty,000. This change could impact people working in the gig economy, online sellers, contained contractors, and other self-employed business organisation owners.

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The in a higher place article is intended to provide generalized financial information designed to educate a broad segment of the public; it does non give personalized tax, investment, legal, or other business and professional advice. Before taking any action, y'all should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the police force, or any other business and professional matters that touch you and/or your business concern.

Source: https://turbotax.intuit.com/tax-tips/self-employment-taxes/tax-tips-for-uber-lyft-sidecar-and-other-car-sharing-drivers/L3IulMEzp

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