Rideshare – Uber/ Lyft – Industry, 1099, Deductible Expenses
With the popularity of ridesharing platforms like Uber and Lyft on the rise, more and more people are earning money working as Uber or Lyft drivers. The ridesharing industry employs a huge fraction of the population. Most people who earn an additional income by working as a driver for the ridesharing apps. Whether you are driving part-time or full-time and bringing in an income, it is crucial that you understand how you can file taxes. Unlike a regular, W-2 employee, there are a number of differences when it comes to income tax filings. This post aims to help you make sense of earning money as a rideshare worker and staying on the right side of tax law.
If you are an independent contractor, you would receive 1099 forms and you would have to pay your own taxes to the IRS, unlike a regular employee whose taxes would be paid by the employer. Generally, rideshare drivers are considered independent contractors. Although several lawsuits have been filed against Uber and Lyft due to how drivers are classified, you need to understand that you would be deemed an independent contractor by the government and would have to deal with your taxes.
Understand Your Rideshare Tax Forms
Similar to any other freelance worker or independent contractor, you would receive 1099 forms from Lyft, Uber, or any other rideshare app that you might be working for. You should be able to access the required information by heading to the Driver Dashboard on the app. Otherwise, you can always request the company for an official 1099 form which you should receive in the mail after having more than 200 transactions or rides and generating more than $20,000 in customer payments. Even if you complete fewer rides, you would still get the 1099-K form from the company.
In addition to the 1099-K form, you may also receive the 1099-MISC form if you make over $600 in non-driving income such as referral fees, bonuses, and other awards. The fact is that you must report your income no matter whether it rises to the level prescribed for the 1099 form or not. You have to pay taxes on the income.
Taxable Income and Deductible Expenses
The annual tax summary which you can view will include total miles covered, vehicle operating expenses, gross earning, and non-ride income. The 1099 form should cover the total amount that customers paid and the fees taken out by Uber or Lyft. You would have to report this amount and deduce the fees as business expenses. They would be treated as deductible expenses. Thus, the amount remaining would be considered your taxable income for the year.
Hire an Accounting Firm to Help You
Now that you know more about earning an income through a rideshare service like Uber or Lyft, you should be able to submit your tax return. However, to avoid any mistakes, we advise you to reach out to us. We will help ensure that you properly file your taxes.