How to File Taxes as an Uber (Lyft) Driver Guide
As a self-employed worker for Uber or Lyft, it's important to understand the tax implications of your side (or full-time) gig. This means getting a solid understanding of tax concepts such as lyft driver taxes, uber driver taxes, and rideshare driver taxes.
One of the most important things to understand is that you are considered a business by the IRS. This means that you are responsible for keeping track of your income and expenses throughout the year and making sure that you pay the correct amount of tax on your earnings.
To make sure that you are paying the right amount of tax, it's important to keep track of your income and expenses. You should keep receipts for any expenses that you have related to your driving business, such as gas, car repairs, and tolls. You should also keep track of how much money you earn from driving.
Are Uber and Lyft drivers self-employed?
As a Lyft driver, you are an independent business owner, not an employee. This means that you are in control of your own business and are responsible for your own taxes. The tax rules are quite different for employees and owners of their own businesses, so it's important to understand the distinction.
Do you receive instruction, evaluations, or training from your employer? If so, you are likely an employee rather than an independent contractor. As an employee, your income and expenses would be reported on a W-2 form, and you would be responsible for payroll taxes.
The good news for Lyft drivers is that most of us are classified as independent contractors. This generally means that we get more business deductions on our tax returns.
If you are a business owner, there are a few things you should keep in mind when it comes to your taxes. First, your deductions go on the business owner schedule of Form 1040 Schedule C. Your income, fees, and tips, are reported on the same form as your expenses. This makes it easy to track your business income and expenses.
Being an independent contractor also has its tax advantages. You get these deductions whether you itemize on Schedule A or use the standard deduction. The IRS publication Tax Guide for Small Business (Pub. 535) can help you with business-related expenses.
Whether you own or rent a car, it will be one of your most important costs. You can deduct car costs based on business miles driven and the cents-per-mile rate, or you can keep track of what you actually spent.
In 2020, the standard rate per mile is 57.5 cents. The mileage rate for 2021 went down a little, which doesn't happen often, and is now 56 cents per mile. No matter which way you use to figure out how much your car costs, you should keep a written record of your business miles.
The IRS may not let you claim business expenses that can't be backed up. Organize your records so that you can back up the numbers on your self-employment tax return with excellent, accurate proof. Tax money will be saved.
Do rideshare drivers have to report their income?
The rates of the federal income tax go up as your income goes up. The brackets are: 10 percent , 12 percent , 22 percent , 24 percent , 32 percent , 35 percent and 37 percent .
If you already make money in other ways, the extra money you make as an Uber driver may push you into a higher tax bracket. Learning how to file your taxes as a uber driver will go a long way in helping ensure you avoid penalties and may even save you some money on your tax bill.
How to get a better grasp on how important deductions are? Depending on your tax bracket, tax deductions save you tax money. If you're in the 24 percent tax bracket, a $100 business expense saves you $24 in income tax, so you're only out $76. Look for costs that have to do with your business.
We did use the plural form of "taxes." There may be a state tax you have to pay, and taxes are built into the price of gas, which you just think of as an auto expense.
The self-employment tax is the main other "big tax."
How do Uber (Lyft) drivers file taxes?
Both the employer and the employee pay the same amount of Social Security tax. You have to pay all of the self-employment tax if you run your own business.
You have to pay all of the self-employment tax for Uber drivers if you run your own business. There are a lot of detailed tax rules, but the main test for whether an expense is deductible is whether it is normal and necessary. The IRS may not let you claim business costs that can't be backed up when it comes to your income tax and this tax. Income tax and this tax will be saved when business expenses are covered.
The rates for the self-employment tax are not as high as those for the income tax, but it is still a big deal. The current tax rate for people who work for themselves is 15.3%, which is made up of 12.4% for Social Security and 2.9% for Medicare. The part of the equation that has to do with 12,4% has a maximum. After 2021, it won't apply if the net business income is more than $142,800.
At certain income levels, there can also be a 9/10 of a percent Medicare tax. Your wages may change how much of your business income is subject to self-employment tax. The self-employment tax has a maximum amount of income that can change based on how much money you make from your UBER business and your regular job.
There are other things that go into this tax. Usually, this tax applies to 92.35 percent of your business income. Also, you can usually deduct half of your self-employment tax. Schedule SE on the 1040 is used to figure out this tax.
When figuring out this tax, you can't use some deductions. There is a deduction of 20% of business income. Only the income tax applies to this deduction. It doesn't change the amount of your business income that is taxed as self-employment income. Most of the time, business deductions help you pay less income tax and self-employment tax.
Tax work for business owners happens all year long. Be ready, and set aside time regularly to work on your taxes and books. Like other business owners, Uber drivers should plan to pay estimated taxes every three months. If you wait until after the end of the year to pay your taxes and only pay them when they are due, the IRS will likely send you a notice of a penalty.
Most estimated payments are due on the 15th of April, June, September, and January. Check out IRS Form 1040-ES and your state's estimated tax form. If your state has an income tax, there may be penalties if you don't pay it every three months.
Are there tax deductions for Uber & Lyft drivers?
You and the IRS will both get 1099 forms that show how much money you made driving for Uber or another company. Is tip money taxed even if it's not on a form? Yes. Given the nature of this business, here are some other costs to consider:
- telephone (or a business percentage if less than 100 percent)
- food and drinks given to passengers (but usually not your own)
- business insurance
- Uber fees and charges
- parking, toll, and airport fees (unless reimbursed)
- home office (IRS rules allow some deductions if part of your home is used exclusively for the business, including your bookkeeping)
- office supplies
- credit card and similar transaction fees related to the business
Uber may be charging you back for business costs that may qualify as uber driver tax deductions. These are not the only costs you can deduct. Sometimes, even if an expense is related to your business, you can't deduct it because of special rules. A good example is a traffic ticket.
Conclusion
As a rideshare driver, it is important to understand how to file your taxes. The good news is that it is relatively simple. You will just need to report your income and expenses on Schedule C. Be sure to keep all of your receipts, as you may be able to deduct some of your expenses.
Make sure you file your taxes by April 15th, and be sure to contact a tax professional if you have any questions. Filing your taxes as a rideshare driver can be daunting, but it is definitely worth it in the end. By taking these simple steps, you can ensure that you are doing everything correctly and getting the most out of your tax return.