For the second installation on how to file taxes as a rideshare driver, we focus more on logistics and the specific forms necessary for rideshare tax filing. Let’s get right to it.
What are the necessary Uber and Lyft driver tax documents?
First and foremost, a standard 1040 tax form will be used by all self-employed citizens to file taxes. Again, self-employed workers are not exempt from filing normal income tax to be reported to the IRS. All U.S. taxpaying citizens can file a 1040 Individual Taxpayer’s Form every fiscal year!
Next in line is Form 1099-MISC. This form should be given to anyone (person who works for you) whom you pay a minimum of $600 for specific services. There are other 1099 forms like 1099-K and 1099-NEC which have more specific functions but they aren’t necessary for most people.
Lastly, we have Schedule C, used for reporting profits and losses within your business. There are also Schedule 1 and Schedule SE which work together to add more details to the 1040.
“… and you’re going to file as a self-employed worker, meaning you’re going to file a Schedule C on your individual form 1040.”
The 1040 is what gets filed – all other forms either support the information within or attach to the 1040. For more ins and outs on these forms and how they work together to create your tax report, check out our article on filing taxes (1099).
How do I maximize tax deductions as a gig worker?
Maximizing deductions is part of how to file taxes as a rideshare driver – so let’s talk about deductions themselves. Tax deductions can be any expenses paid in order to help you attend to your job. These deductions are considered 1099 write offs since that’s where they’ll be recorded. Luckily for gig workers, there are a plethora of potential tax writeoffs to be taken advantage of.
We interviewed a gig worker who is hip to Moves for the low down on her thoughts and processes around managing her finances for taxes. She does everything from ridesharing to shopping and has some experience in the field. For Lyft and Uber driver tax deductions, everything related to car maintenance can be removed: gas, car washes, car insurance, detail… everything! Plus, by-expenses like tolls and parking tickets can be called Uber and Lyft driver tax write-offs.
“You can actually take the interest off your credit card for tax deductions. Because you’re building credit towards your business with the interest rate that you’re using for your gas credit card”
Your cell phone bill + insurance can be added to that list. Oh, and charity is a great way to maximize freelancer tax deductions.
“[I make] Charitable donations, so $300 a year. So you can go in and donate old furniture and stuff and get $300 on that”
So there you have it. Obviously, keeping up with all the configurations can be a handful, so organization is key. Try separating your business from your personal transactions with a dedicated spending account.
What resources are available for rideshare tax filing?
For one, a rideshare tax calculator is a great way to estimate your taxes based on your weekly work hours and frequency. You can also grab a tax summary from your contracting company, which contains all the important details concerning your work year. Plenty of employers send this out at the end of the year, but sometimes you’ve gotta ask.
Our friendly interviewee reported using Keeper Tax for standard tracking and QuickBooks to keep up with deductibles. Expenses were tracked on an entirely separate spreadsheet, so manual input is always an option too, given you have the time.
There are also a ton of apps that show you how to track mileage for taxes as a rideshare worker. All you have to do is keep your phone on with GPS connected during your rides and the calculations go into the app. MileIQ was recommended personally to us by this gig worker, but the options are plentiful.
Lastly, there’s always the option of getting help from a CPA, be it a real human being or tax filing software like TurboTax. A mix of applications, software, and tools will likely serve you best overall – narrow down your toolbox over time as you develop a personally tailored strategy.
How can you prepare for tax season during the year?
Firstly, consider each avenue of income at your disposal. The stuff coming in from another employer won’t be a bother – same filing process as usual. For self-employed income, organize each stream based on the nature of the work. Jobs of like nature get tallied up on the same form.
Prepare yourself mentally with a friendly reminder that quarterly tax estimates are a thing. It’ll make your life easier anyway. Just add it to your Lyft or Uber driver tax checklist. Also, expect to pay up to 30% in taxes on your gross annual income. Set the money aside whenever you get paid just as if you were an employer doing so for an employee (which, technically, you are).
Create a separate bank account for business-related transactions, particularly, one solely dedicated to business expenses. Doing so will spare you the hassle of saving receipts throughout the entire year. It’s also a bit easier than, say, weekly financial tracking and accounting. Remember, the more expenses you document, the more expenses you can write off, reducing your taxable income for the year.
“… a lot of people say, Oh, I got a 1099. And they just type it in their tax software, and they’re like, they’re gonna pay tax on $10,000. No, you’re gonna pay tax on the $10,000 minus all the expenses that you had related to that income.”
Download apps or software meant to ease the blow of tax stress. We mentioned a few above – shop around to see what fits your bill. Develop a strategy. Make it a lifestyle.
Become familiar with all of the essential tax forms for self-employed workers so you know what goes where when comes time to file. Get an idea of the important values that concern your situation, like the minimum gross annual income for your status.
Last but not least, be aware of the importance of organization! That’s what all of these tips are about, essentially. With no organization, things get scary in April. On top of the nerve-racking stress, there are financial repercussions for being disorganized. You will pay tax on a greater
dollar amount than you deserve, you may have to pay fees, and it will be harder for professionals to help you with less information. Here’s a final word from Jody on the matter:
“The people who, who pay a lot… are the people who are disorganized. So the more organized you can be, the better off you’re going to be, the better advice you’re going to [get].”