2019 Rideshare Driver Tax Guide 2

2019 Rideshare Driver Tax Guide

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2019 Tax Tips for Uber and Lyft Drivers

Many people are turning to rideshare companies, such as Uber or Lyft, to earn extra money.

Rideshare driving can be a full-time gig for motivated drivers. One of the reasons why this work is so attractive is that you do not work for the rideshare company. Instead, you are self-employed, and you contract out your services to the rideshare company.

Rideshare drivers are categorized as independent contractors for tax purposes.

What is an independent contractor?

Independent contractors are not employees. As a result, no taxes are withheld for federal or state income tax payments. Instead of receiving a W-2, contractors are provided 1099 forms, which list the gross amount of pay without tax withholding.

Most independent contractors must submit estimated tax payments each quarter. You report the estimated tax payments on your tax return when you calculate your tax liability. It’s important to plan for the tax payments you must submit, so that you can pay your entire tax bill on time.

Your tax filings will be different as an independent contractor. Contractors post their income and expenses to Schedule C on their personal tax return (Form 1040).

If you receive a 1099 as a contractor, you report the gross pay as income on Schedule C, and subtract your business expenses to calculate your profit or loss. The profit or loss total is added to your other income (spouse’s W-2, interest, dividends) on Form 1040.

A great way to lower your tax bill is to get every deduction that you are legally entitled to as a small business owner. There are many deductions that drivers may not use when filing their taxes.

Understanding Your Tax Forms

How Form 1099-MISC works

  • Other Income, Box 3: This amount is the total fees your received from the rideshare company. Record this amount as gross receipts on Part 1, line 1 of Schedule C on your personal tax return. The box 3 amount is reported to the IRS.
  • Account Number: The account that the rideshare company has assigned to you. This number allows the company to track the amount paid to each driver.
  • State/ Payer’s state number: The rideshare company is also required to report fees to your state, so that the state can verify that state income taxes are paid on your earnings. This box lists a number used by the rideshare company for your state.

The amounts on Form 1099-MISC are reported to the IRS, and to your state’s Department of Revenue. If you don’t include the 1099 information on your federal and state tax returns, you will have to file amended returns and pay taxes on your earnings. 

Other business expenses, including commissions and fees paid to your rideshare company, are reported as deductions on Schedule C. One of your largest deductions may be for mileage.
 

The IRS provides two ways to deduct your mileage expenses: the actual expense method, or the standard mileage rate method.

Calculate the deduction using both methods, and use the method that gives you the higher deduction amount. There are several rules that prevent you from changing methods from one year to the next:

  • Owned car: If you own a car and want to use the standard mileage method, you must start using the method in the first year that you own the car. In later years, you can choose to use either method.
  • Leased car: If a driver leases a car and starts using the standard mileage method, the driver must use the standard mileage method for the entire period of the lease.

Your car’s depreciation expense may be a big factor in your mileage expense calculation. Use this calculator to analyze the impact of depreciation, and to determine which method you should choose.

Below is a broad overview of what is included in each type of deduction:

Finally, you need to understand the tax forms that the rideshare company will be providing you with, and what they mean.

Your annual rideshare statement is another helpful document you can use to complete an accurate tax return, but your official tax forms should be your primary source of information.

Expense Description

RIDESHARE COMPANY’S YEAR END SUMMARY

Form 1099-Misc

Form 1099-misc is an IRS form that reflects the total of referral, promotion, and other payments for the year. Only drivers/deliverers who received $600 or more in payments during the year will receive this form. NOTE: If you made less than $600, you still need to report your income and expenses. Refer to your rideshare company’s tax summary to obtain the information that you should report. 

Form 1099-Misc

Form 1099-k is an IRS form which includes all on-trip gross earnings. Beginning in 2018, Uber & Lyft only send these to drivers who earned more than $20,000 in passenger/delivery payments AND provided at least 200 rides/deliveries during the year.

Keep organized records

Many rideshare drivers lose valuable tax deductions, due to poor recordkeeping.

Make the effort to keep your records organized throughout the year. Use technology tools and track your mileage accurately. Keep receipts in a specific place in your car, and file the receipts at home each day. You can also use an app like Hurdlr, which eliminates the need to track everything manually. Hurdlr has a free version and a paid version. The paid version is nice, but the free version is still very helpful and tracks your expenses automatically.

These efforts will pay off, when you’re able to deduct all of the expenses and reduce your tax liability.

This article is for informational purposes only and ‘The Rideshare Guru’ does not make any guarantees to its accuracy as each individual’s tax situation is unique. We recommend that you hire a tax professional if you are uncertain of how to properly file your taxes as a rideshare driver. We may get a referral fee to services or products linked to from this site.

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