How To File Taxes For Instacart Shoppers
While working as a full-service shopper you might wonder how to file taxes for Instacart shoppers? Here is a complete guide to equip you well enough so that you can ask the right questions to your tax specialist.
In this article, you will find out what Instacart is, how to file Instacart taxes, which tax forms are relevant, and what supporting documents you will need. You will also learn about the deductions you can claim while filing taxes for Instacart.
What Is Instacart?
Instacart is an app-based grocery delivery and pickup service. Customers can order groceries and other items from the comfort of their homes, and the “Instacart shopper” shops and delivers them to their doorstep.
As an Instacart shopper, you will be visiting local grocery chains, pet stores, specialty shops, and convenience stores to fulfill the customer's order. While shopping if there is an out-of-stock item you will notify and work with the customer to find a suitable replacement.
How Taxes Work For Instacart Shoppers?
How you are taxed as an Instacart shopper will depend on whether you are an in-store shopper or a full-service shopper. The in-store shoppers are Instacart employees whereas full-service shoppers are freelancer delivery drivers.
To find out whether the company has hired you as an employee or independent contractor, the IRS gives the following guideline.
“The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.
You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.”
Once you determine whether you are an employee or an independent contractor you can start considering the tax implications. We will now look at how to file taxes for Instacart shoppers?
When And How To File Taxes?
If you are an in-store shopper you will be treated as an employee. Instacart will deduct social security, medicare, and a few other taxes from your paycheck and remit that to the IRS. At the year-end, you will receive Form W2, wages and tax statements which you will use to report your earnings and claim any refunds.
The total self-employment tax which is the social security and medicare tax is 15.3%. As an employee half of it which is 7.65 will be deducted from your salary and the remaining half is contributed by your employer.
Working as an independent contractor you are liable to figure out and pay all your taxes including self-employment tax on your own. Additionally, you are responsible for estimating your quarterly taxes and paying them on time.
As a full-service shopper if you expect your tax liability to be $1000 or more after considering all your deductions then you are liable to compute and make estimated tax payments every quarter to the IRS. Delay in payment of these quarterly taxes will result in penalties. IRS states that
“If you didn’t pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax.”
Your estimated tax payments are due on the 15th day of April, June, September, and January the following year as shown in the table below:
|
Quarter |
Payment Period |
Due Date |
|
Q1 |
January 1 to March 31 |
April 15 |
|
Q2 |
April 1 to May 31 |
June 15 |
|
Q3 |
June 1 to August 31 |
September 15 |
|
Q4 |
September 1 to December 31 |
January 15 |
What Are The Tax Forms?
As an employee, the in-store shoppers receive a Form W-2 by January 31st each year. This form contains relevant information related to withheld taxes and wages. You will report your income on Form 1040 based on the information provided in Form W2.
As an independent contractor, the full-service shoppers should be familiar with the following forms.
- Form 1040. This form is filed by all the taxpayers with the IRS. But you have to file additional schedules for being an independent contractor with Form 1040.
- Schedule C. Report your business income and expenses on Schedule C. Compute your profit for the year by subtracting your earnings from your spending.
- Schedule SE. Since you are not an employee therefore you are responsible for computing, filing, and paying your own self-employment taxes by using Schedule SE. This includes your social security and medicare taxes.
- Form 1099. You will receive this form if you have earned more than $600 during a tax year. This includes any tips you got from the customers. You will receive one copy of Instacart 1099 and the other will be sent to the IRS.
What Supporting Documents & Statements I Will Need?
As a self-employed individual, you are allowed to deduct your business expenses from your earnings to lower your taxable income. However, to claim these write-offs you are required to keep track of all the expenses based on documentary evidence. These can include receipts, invoices, mileage logs, phone bills, etc.
To increase the reliability of these documents related to expenses make sure it has the amount, time & place, business purpose, and name of the vendors.
In case you don't have these paper receipts you need to look into your bank statement and credit card statements. You can work with an expert tax accountant who can do your bookkeeping on the basis of these statements. You can fill in the missing information by looking at the online records of the bills you have paid.
What Are Instacart Tax Deductions?
Whether you are a Shipt Shopper, driving for DoorDash, or an Instacart shopper you are likely to be working as an independent contractor. This means the IRS allows you to deduct ordinary and necessary business expenses to lower your taxable income. The tax deductions you can claim are not limited to the following expenses.
Automobile Expense
While working as an Insta shopper you will be driving a lot from one grocery store to another. And then will deliver the entire order to the customer's doorstep. If you use your own car for business purposes you can write off the costs associated with it.
The IRS allows you to deduct mileage expenses either by using the standard mileage rate (58.5 cents for 2022) or the actual expense method if you qualify for both options.
Apart from that, you are allowed to write off toll fees unless they are reimbursed to you. Parking fees are also tax-deductible except for the ones that resulted from any violation.
Insulated Bags
While delivering groceries you will require temperature-controlled bags to make sure that certain items are kept at the right temperature to prevent them from going bad. Whatever you spend on these insulated bags is considered tax-deductible.
Mobile Phone
While shopping you might have to call the customer to notify them about the out-of-stock items or ask for directions to their home. You can write off your phone bills 100% if they are only work-related. However, if you utilize your phone for personal purposes then you need to apportion the total phone cost.
Additionally, the purchase cost of a mobile phone and its accessories are 100% deductible if you are using it exclusively for work.
This is not an exhaustive list you might be eligible to deduct roadside assistance fees, platform fees, and any amount you paid for your background check and inspection before getting hired.
This article contains general guidelines on how to file taxes for Instacart shoppers but how exactly you file taxes will depend on your particular situation. So it is always a good idea to consult a tax specialist so you can be sure that your taxes are computed and reported accurately.