Uber Driver Tax Filing 101: Forms, Expenses, Profit/Loss, Deductions, Apps


(Bick Bhangoo) #1

Most Uber drivers are either employed in a full-time job and using Uber to make more money, or are fully self-employed using Uber as their main source of income. Whatever the reason, once you start driving for Uber, you are designated as an independent contractor and have to file tax returns at the end of the year.

Some Uber drivers have experience in preparing and posting tax forms, while others have no idea and sometimes no time. Using an accountant is always a plus, but if you cannot afford one or prefer to save the money and apply by yourself, then this article will explain what you have to do.

Disclaimer: We are not a professional CFA or CPA service, and we do not offer professional advice. This article is only an explanation of the process and cannot be used as a professional tax service advice or financial management source of information.

  1. The Paperwork

As an Uber driver, you must get from Uber form 1099 no later than January 31st.

The list of forms you will need, and we explain I brief about each one is:

  • 1099
  • 1099MISC
  • 1040C
  • 1040SE
  • 1040
  • 1099K


1.1. Form 1099 according to the IRS:

File this form for each person to whom you have paid during the year:

  • at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest;
  • at least $600 in:
    • rents;
    • services performed by someone who is not your employee;
    • prizes and awards;
    • other income payments;
    • medical and health care payments;
    • crop insurance proceeds;
    • cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish;
    • generally, the cash paid from a notional principal contract to an individual, partnership, or estate;
    • payments to an attorney; or
    • any fishing boat proceeds,
  • In addition, use this form to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.

Since, you most probably received more than $600 from Uber for services performed as an independent contractor, you will need this form that shows how much money Uber paid you as well as taken from you during the year.

1.2. List of Expenses

This is a very important list and includes a lot of spending that you might not usually associate with your rideshare work. Here is a list of expenses that you must include.

What to Track

There are certain expenses that you cannot include, and the app will direct you, for instance, you cannot include dry cleaning since it is not a business-related expense, unless you are an UberBlack driver and have a specific uniform you can prove you wear for work purposes. Once you complete your schedule or specific ride, you turn the app off.

What you can include in your scheduled expenses are mobile device load uses, car washing and interior cleaning, all the various items you buy for cleaning and helping passengers. Food during work hours as well as snacks and drinks you might provide passengers on long trips.

Here is a list of deductible expenses taken from Stride:

  • Mileage
  • Car Cleaning
  • Passenger Goodies
  • Cell Phone Accessories
  • Cell Phone Purchase
  • Cell Phone Service
  • Dashcam
  • Inspections
  • Parking Fees
  • Tolls
  • Music and Paid Apps
  • Car Mat
  • Car Seat Cushion
  • Food and Drink
  • Car Loan Interest
  • Health Insurance
  • Oil Change
  • Gas
  • Car Insurance
  • Car Repairs
  • Car Lease Payments
  • Car Depreciation

1.3. Schedule C and SE Forms

Schedule C: According to the IRS, Schedule C Use this schedule to report income or loss from a business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a business if:

  • your primary purpose for engaging in the activity is for income or profit, and
  • you are involved in the activity with continuity and regularity.

Since you are an independent contractor and business owner, you must ensure that all your income and expenses are recorded properly and labeled as "self-employed." You then take the data you received in Form's 1099/1099MISC and 1099K and use that to fill in Schedule C form.

Schedule SE: According to the IRS "Use Schedule SE (Form 1040) to figure the tax due on net earnings from self-employment. The Social Security Administration uses the information from Schedule SE to figure your benefits under the social security program. This tax applies no matter how old you are and even if you are already getting social security or Medicare benefits."

This form calculates how much of your income is taxable. You do this by taking your list of expenses and deducting them from Schedule C form.

1.4. Calculating your Profit/Loss

Now that you have all the various supplementary forms, you must now take the total income you received from Uber in form 1099 and deduct from it all the expenses you paid as presented in forms 1040C and SE. The remainder will be your total profit or loss.

1.5. Form 1040

https://www.irs.gov/pub/irs-pdf/f1040.pdf

The 1040 form is the IRS official Individual Income Tax Return form and after you have completed filling in forms 1040 C and SE you fill this form out and can get help online from the IRS site if you have issues filling out specific areas of the form.

1.6. Form 1099K

According to the IRS, "A payment settlement entity (PSE) must file Form 1099-K for payments made in settlement of reportable payment transactions for each calendar year. A PSE makes a payment in settlement of a reportable payment transaction, that is, any payment card or third party network transaction, if the PSE submits the instruction to transfer funds to the account of the participating payee to settle the reportable payment transaction."

This form is used for drivers who earned over $20K from Uber or received over 200 payments from third-party finance institutions such as credit, debit cards or online financial wallets.

1.7. Form 1099MISC

According to the IRS, "File this form for each person to whom you have paid during the year:

  • at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest;
  • at least $600 in:
    • rents;
    • services performed by someone who is not your employee;
      • prizes and awards;
    • other income payments;
    • medical and health care payments;
    • crop insurance proceeds;
    • cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish;
    • generally, the cash paid from a notional principal contract to an individual, partnership, or estate;
    • payments to an attorney; or
    • any fishing boat proceeds,

In addition, use this form to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.

Uber will give you this form instead of 1099 since you most probably received more than $10 from Uber passengers as tips for services performed as an independent contractor for Uber.

2.1. Uber driver tax deductibles

To fully comprehend what can be deducted from your income and reduce your tax, we now explain in a bit more detail the list of expenses presented above in paragraph 1.2.

  • Mileage

Rideshare driving is a car based operation and as such the car is the key to the business. Therefore, all the expenses related to the car and the service it provides to Uber customers are tax deductible. The Mileage factor is best deducted from the Standard Mileage Rate rather than the Actual Expenses Method since the work is actually mileage based. The standard mileage rate is an IRS acceptable standard, and during 2017 the mile rate was set at 53.5 cents. All drivers need to do is multiply the total number of miles driven in the car from the start of a shift to the end of a shift as well as miles driven to car washes and other car mechanic related services related to the work.

  • Car Cleaning

This is straightforward, every time the driver cleaned the car and took a receipt, the car cleaning cost is tax deductible. Don't forget the miles driven to and from the car wash are also tax deductible.

  • Passenger Goodies

This includes a long list of items that the driver might decide to invest in for the passenger's comfort.

  • Cell Phone Accessories

Any cable or accessory that is used to hold, clean or connect to a smartphone, whether for the phone that holds the app or for passengers use is tax deductible. Even a protective screen is considered a viable item in this instance.

  • Cell Phone Purchase

When you purchase a phone, including the plan you purchase, the cost of the purchase is tax deductible. The phone is the "office" of your business since it holds the app as well as any third party apps you might use to help manage your driving work.

  • Cell Phone Service

The actual phone service and insurance you pay on a monthly basis is tax deductible.

  • Dashcam

This is an important "gadget" which provides safe driving as well as a clear line of view to the map that navigates you during work. It is tax deductible.

  • Inspections

All car inspections, whether by Uber or by anyone else for the sake of car safety is tax deductible. If you had to drive to the inspection, then the miles driven to and from the inspection are tax deductible.

  • Parking Fees

During the schedule you logged into the app to the moment you logged off are all tax-deductible moments, so if you parked and paid for it, you must retain your receipt for a tax deduction.

  • Tolls

While Uber does pay the driver for all tolls during a ride, if the driver had to pay for a toll while driving during periods 1 and 2, then the receipts should be collected since they are tax deductible. At least get the deduction, since Uber doesn't pay you for those periods.

  • Music and Paid Apps

For the sake of passengers enjoyment as well as the drivers need to relax, any and all media applications, streams and files bought are tax deductible.

  • Car Mat

This small item is a component of the car and part of the system that keeps it clean, so it is tax deductible.

  • Car Seat Cushion

While this could be considered a luxury item, it is, in fact, an important accessory for passengers and if orthopedic, for the driver too. All seat cushions are tax deductible.

  • Food and Drink

Apart from eating and drinking as part of working requirements, any food and beverage offered to passengers during a ride are all tax deductible. Just remember to accumulate all receipts and associate the expense to a specific ride.

  • Car Loan Interest

If you took a loan out to buy a car, the loan interest is tax deductible since it is part of the cars purchasing price.

  • Health Insurance

Any health insurance policy taken for work purposes is considered tax deductible.

  • Oil Change

All oil changes are tax deductible.

  • Gas

Apart from miles, you also get tax deducted from your gas, so every time you fill up for work purposes, keep the receipt. Do not try to add gas for out of state driving, since the IRS knows that Uber and Lyft do not let drivers drive out of State unless you have a fare that requests that.

  • Car Insurance

Apart from NYC, all rideshare drivers need rideshare insurance coverage. NYC requires commercial insurance coverage. Both are tax deductible.

  • Car Repairs

All visits to your mechanic are tax deductible since your car works for most of the time, it is reasonable that all car repairs will be work-related. Driving to the mechanic and back are deductible too.

  • Car Lease Payments

As with car loan interest, car lease payments are in fact car purchase fees and as such are tax deductible.

  • Car Depreciation

Make sure you know the car depreciation value. Make sure you don't just come up with any figure you like. You must use an IRS acceptable depreciation calculator for this figure.

Non-expenses related tax deductions include Uber service fees, bank fees for transactions, accountant fees if you decide to use an accountant and legal fees if you needed to use a lawyer as part of an action related to your driving.

2.2. Saving Cash for Tax

It is a wise person that puts aside a percentage of the income for the end of the year taxes. You do not want to end up at the end of the year with a large tax evaluation or even a small one and not have the sources to pay for. The average self-employment tax rate is around 15.3% add to this local, state and federal taxes and you could be looking at 30% of your net income. Remember, you pay taxes on net no gross income. So, we suggest you put aside around 25% of all your income, and at the end of the year you will have enough to pay your taxes as well as having saved up a nice amount of cash.

There is one Though Shalt Not, and it is though shalt not mix personal with business expenses. If the IRS thinks you are overloading your expenses with unwarranted receipts, they will audit you. Do not include anything you bought for personal reasons, even if you bought it during a schedule.

2.3. Tax Apps

While we personally do not recommend you fill in the forms by yourself, a lot of drivers cannot afford the use of an accountant, or in some instances have many years of experience in self-application. In this instance, we can provide you with a review of some efficient tax software applications.

TurboTax

TurboTax is an easy to use and convenient online tax application service, provider. They are an automatic online tax return filing company focused on providing a comprehensive tax return filing. However, they are not cheap (yet tax deductible). Their cost is $114.99 for Federal, and for State, it's $39.99.

H&R Block

This company specializes in online tax advice to expats. At the same time, they offer support to anyone that wants to file an online tax report. Their services are cheaper than TurboTax, and they do take into consideration Uber drivers. They are not automatic, your tax returns are dealt with by a live professional. Their fees are $74.95 for Federal and for State its an additional $19.95.

TaxAct

TaxAct is another tax reporting company online; it charges $39 for Federal and a further $37 for State reports. They do provide 30% discount at the moment. The system is automated and offers a comprehensive help to accompany any questions during the refining process.

CalcXML

This is a standard tax calculator, not a tax filing app. You input the gross income, your expenses and your filing status and the program will give you a rough estimate of what your tax amount should be. It is a useful tool to use for the second year to estimate how much money you should save every month in preparation for the second years taxes. That assumes you will work the same way and that Uber will not change its passenger fares too much.

2.4. Tax Evasion

Tax evasion is an illegal activity where a person or company decides to avoid paying taxes intentionally. When caught, a tax offender faces criminal charges, fines and penalties and even prison.

Tax evasion can be either total nonpayment of taxes or underpayment of taxes due to fraudulent reporting. The IRS uses some basic tools to determine whether a person or company is evading payment of taxes, and the most basic form is through the 1099 forms. The IRS will not consider a person or company guilty of tax evasion until the moment their investigators deem the actions of the person or company as intentional.

Once a tax evader has been charged, they can face excessive fines as well as jail time. They will be held responsible for paying back all missing taxes with interest and fines. During the investigation into a person finances, the IRS will deem whether the intent was on purpose to either hide taxes through false claims or hide taxes from making no claims. When someone tries to hide taxes through association with third parties they are committing an act of fraud. In some instances, the use of another person's ID will constitute an act of identity theft added to the act of fraud.

There is a difference between Tax Evasion and Tax Avoidance. Avoidance is a way to pay fewer taxes through legal ways of managing funds. Evasion can be in the form of abusing charities, investment in tax-deferred funds and even individual retirement accounts.

IRS Sharing Economy

In response to the growing sharing economy, where owners of properties, vehicles and other resources rent them out or offer them as a service, the IRS set up a sharing economy tax center site:

The IRS states on this site: "… if you receive income from a sharing economy activity, it's generally taxable even if you don't receive a Form 1099-MISC, Miscellaneous Income, Form 1099-K, Payment Card and Third Party Network Transactions, Form W-2, Wage and Tax Statement, or some other income statement. This is true even if you do it as a side job or just as a part-time business and even if you are paid in cash. On the other hand, depending on the circumstances, some or all of your business expenses may be deductible, subject to the normal tax limitations and rules."

Uber drivers must remember that their income is taxable and as such, they must take into account all the pertinent details as mentioned above. Final word, we still suggest you consult with a CFA or CPA, especially if you work for more than one rideshare company, such as Lyft, Amazon Flex, DoorDash, etc.… you will need to consider a CPA for all the paperwork you will be using.


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TurboTax Self Employed Explained: How to File Rideshare Taxes
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(Zachary Fankhauser) #2

That’s quite a comprehensive take, yet I’m still puzzled a little. Recently I was working as an independent contractor, so I needed to file a W-9 every tax period, doing so with this template w9.pdffiller.com Didn’t succeed much in that field, so now I’ve started my business as an Uber driver. So I’m wondering if they issue forms in hard copies or online