If you are an independent contractor, or simply put, an Uber or Lyft driver, then you must file taxes at the end of the year. In fact, you must maintain your taxes on a constant basis just to be sure you don't make any mistakes at the end of the year. This means, keeping a full record of all expenses, hours of work and miles driven.
There are a number of articles in this forum that discuss rideshare taxes, such as
Rideshare Taxes: What Type Of Taxes Do You Owe To Uncle Sam?
Rideshare Tax Calculator – A Simple Tax Calculator for Uber and Lyft Drivers
So, I am not going to discuss what has to file in the report; I will just concentrate on how Turbo Tax works and what you need to do to fulfill a successful report.
You would need your Uber 1099-K, as a driver you will receive this automatically from Uber if you made more than $20,000 and over 200 rides or deliveries in a year.
The Uber 1099 Misc. document, which shows how much you earned in bonuses and includes all driving bonuses as well as referral income. However, only if you made more than $600 in a year will you receive the form from Uber.
The Uber Tax summary document they send to you will include all the breakdown of earnings and business expenses; this is to be taken off your combined gross revenue.
If you drive for Lyft, then the Lyft 1099-K document which is sent to anyone that generates at least $600 in gross ride income. Don't wait for this if you do not go over the minimum income requirement.
The Lyft 1099 Misc. which is sent to drivers who made over $600 in bonuses, mentor rides, etc.
The list of deductibles. This means that you must keep a complete track of all your miles and expenses every day throughout the year. This is the best link to know what a deductible is:
Uber Driver Tax Filing 101: Forms, Expenses, Profit/Loss, Deductions, Apps
So, you have got all your paperwork, its time to use software to generate a report and send off to the IRS. TurboTax is such a platform, and here is what it does and how you will operate it.
Let's start off by explaining that TurboTax automatically checks for input errors, an audit check to assure you that the return you get is estimated as well as notifying you the probability of being audited. It will also give you the tax return amount.
Step One –Gross Revenue
In this screen, you enter in your gross income. Make sure to include both sources if you drive for both Uber and Lyft, and only use the information you find in the 1099K and 1099 Misc forms.
Note that the business summary screen below shows your total income or sales amount. Also, note that the gross and net amounts are equal, that's because you will have to input your expense next.
Step Two: Mileage and Car Deductions
The first thing you do is enter the total number of miles you drove. For tax purposes, this means all the miles you drove from starting the app to closing it. Make sure you have a good mile tracker so that all period 1, 2 and 3 are tracked and logged.
The next step is to enter all your expenses. As per the list in the article I linked, here are most of the deductions you will need to record during the year:
- Split Fare Fees
- Safe Rides Fees
- Misc Fare Fee
- Airport Fee
- Uber Service Fee (20% or 25% that Uber deducts.)
- Lyft Service Fee (20% or 25% that Lyft deducts.)
- Lyft Tolls
- Car Cleaning
- Passenger Goodies
- Cell Phone Accessories
- Cell Phone Purchase
- Cell Phone Service
- Parking Fees
- Music and Paid Apps
- Car Mat
- Car Seat Cushion
- Food and Drink
- Car Loan Interest
- Health Insurance
- Oil Change
- Car Insurance
- Car Repairs
- Car Lease Payments
- Car Depreciation
- Site Hosting for your rideshare driving site
- Advertising overheads
- Paid online services for marketing
You can classify each deduction, or to make life simpler, categorize the main ones and classify the rest as Other Expenses.
Fourth Step: Error Check, Audit Check, Print and File
After you complete your input, TurboTax will audit your results and provide you will the amount of tax you need to pay, the city taxes you must pay as well as present you with an audit risk level.
I expect you have been saving a portion of your income every month for tax purposes. Don't fall into the trap of complacency and spend all your income, because you will need to pay some tax at the end of the year.
If you want to know what percentage of your income is a tax, you can just take your federal tax amount and divide it by your gross income. This will give you the percentage of your income you need to save for next year if you drive the same way.
TurboTax is an easy tool to use. You don't need to be a genius to manage your taxes if you only drive for Uber and you are single. If, however, you have more then one source of income, perhaps you are also employed elsewhere as an employee if you are married and your spouse generates income. Perhaps you have kids; maybe you are a pensioner or a student. Every individual is different but does fall into certain IRS categories. To make sure you know you are filing your tax reports properly, do it first with a professional tax accountant or CPA. Learn from the first time, and then take it on yourself. The more complex your living style, the harder it will be to fill in these forms and also know which other forms you might need.