In January, you’ll receive a Form 1099 reflecting the income you earned working as an independent contractor driver for the ride-booking company. Your tax return is about to get a bit more complicated. And if you’d like to take the IRS’ standard mileage deduction to calculate your deductible vehicle expenses, it’s essential that you keep a log of miles that you traveled for business. It’s important to keep receipts for all of the items you purchase to run your business. Since you probably spend a significant amount of money running your ride-sharing business (on things like gas, car washes, mints, and bottled water), you’ll want to claim those expenses as deductions on your tax return. Welcome to the world of trade or business deductions.
While it can be exciting to see the deposits in your bank account every week, keep in mind that you need to pay the taxes on this side income. This tax covers your required contributions to Social Security and Medicare, and functions similar to FICA taxes that are withheld from your wages and paid by your employer if you are an employee, rather than self-employed. What you make is not what you earn.īecause you are self-employed now, your income is subject to a 15.3 percent self-employment tax. Congratulations, you’re a small business owner!Īlong with the freedom to choose your own schedule, dictate your own hours and be your own boss, you’ll need to consider that the income you receive is self-employment income, and self-employment tax will be due (see #2). You’ll also need to think about things like commercial insurance to protect yourself and your property, as well as state and local rules and licensing requirements. For drivers who have steered into the “sharing economy,” here are five essential facts to keep in mind as tax time approaches.
But when it comes to income taxes, the difference between those two types of income is as big as the difference between hailing a cab in the rain and ordering a ride in a Town Car with the touch of a smartphone button. It’s likely that many of these drivers moonlight with these companies to earn income in addition to what they earn with their main employer. Mobile ride-booking services operate in cities all over the world, connecting passengers with drivers of vehicles for hire through various smartphone applications. Here are five essential facts about Uber driver taxes, so you can avoid unwelcome surprises. Editor’s Note: Whether you drive for Uber, Lyft or other ride sharing service, don’t underestimate the importance of reporting your income for tax purposes.
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