Whether you drive for Instacart, Doordash, Postmates, Shipt or another delivery driver service, this post is for you. Today we're going to talk about the 1099's you receive in the mail and what they mean for you and your taxes.In previous posts, we covered Uber&Lyft 1099 forms (K & MISC) and we'll be using a similar format for this post as it manages to be both descriptive and helpful with each kind of ridesharing or delivery driver service.
Starting in the first week of February delivery drivers will begin getting their 1099 forms for previous years earnings. It's officially tax time!Some delivery drivers will be getting the 1099-MISC if they generated under $20,000 in earnings for the previous year, while others will be receiving form 1099-K if they've accrued more than $20k in earnings & 200+ transactions.Note, a "transaction" in this instance is a "ride". So if you completed 200 paid rides within the calendar year + you earned more than $20,000, you'll be getting the 1099-K.Before we dive into the specifics we need to state that this post is not to be considered tax advice. For specific advice regarding your taxes, you should speak directly with a tax professional.
How Are Delivery Drivers Classified?
If you're driving for one of the gig economy companies such as Shipt, Postmates, Doordash, Instacart, .etc - you are classified as an Independent Contractor by the IRS. Every ridesharing service operates under the same structure for their drivers and you are essentially your own small business.There are many upsides and downsides to being your own business vs. employee, however, we're not going to cover that in this post. Right now we just want you to be aware that you're going to be classified as an independent contractor and with that classification comes a set of tax rules that differs from a typical employee.The first of which is self-employment tax.According to the IRS independent contractors are deemed as self-employed and 92.35% of their earnings subject to self-employment tax.The self-employment tax tiers for 2017 are:
- 15.3% on the first $127,200 in net self-employment income.
- 2.9% on any net self-employment income above $127,200.
The IRS set up a handy little section talking about the sharing economy (this is you!) and the different tax obligations.Most importantly, as you may have noticed by now, your taxes are not deducted from your paychecks. This means that you may have to be making quarterly payments. Take a look at the IRS' quarterly estimated taxes page to get a full understanding of your obligations of making quarterly payments.Alright, let's jump into the 1099 forms!
The 1099 Form
Form 1099 has many versions as you can see below.
- 1099-A: Acquisition or Abandonment of Secured Property
- 1099-B: Proceeds From Broker and Barter Exchange Transactions
- 1099-C: Cancellation of Debt
- 1099-CAP: Changes in Corporate Control and Capital Structure
- 1099-DIV: Dividends and Distributions
- 1099-G: Certain Government Payments
- 1099-H: Health Coverage Tax Credit (HCTC) Advance Payments
- 1099-INT: Interest Income
- 1099-K: Payment Card and Third Party Network Transactions
- 1099-LTC: Long-Term Care and Accelerated Death Benefits
- 1099-MISC: Miscellaneous Income
- 1099-OID: Original Issue Discount
- 1099-PATR: Taxable Distributions Received From Cooperatives
- 1099-Q: Payments From Qualified Education Programs (Under Sections 529 and 530)
- 1099-R: Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
- 1099-SA: Distributions From an HSA, Archer MSA, or Medicare Advantage MSA
However, you will likely receive 1 of either the 1099-MISC or 1099-K from the company you drive for. The difference between the 2 forms will be explained a section below.When are 1099 forms sent?The deadline for all companies that are obligated to send 1099 forms to both employees (W2) and independent contractors (1099) is January, 31st. At the time of this writing in 2018, you should have already received all of the 1099 forms you were supposed to get.If you did not receive form 1099 from a company that typically means that you earned less than $600, however, this does not mean you don't owe taxes on your earnings! You are obligated to pay taxes on all taxable income regardless of whether you've received a 1099 or not.Form 1099-MISCDid you receive a 1099-MISC form? If so, the MISC which stands for miscellaneous, means you've made at least $600 in prior year earnings from one source. As an example. If you earned $821 driving for Instacart the previous year you should receive a 1099-MISC in the mail with earnings showing $821.Here are the IRS instructions for Form 1099-MISC.Form 1099-KIf you got the 1099-K form in the mail then you've earned over $20,000 and have more than 200 transactions in the previous year.As an example. If you were a Shopper for Shipt last year and earned over $28,390.32 on 1,650 rides, you would receive form 1099-K because you earned over $20,000 and completed more than 200 separate transactions.It's going to look a little weird at first because you're probably not a merchant or 3rd party payment transactions, however, this is the correct form and these are the instructions for Form 1099-K
As a delivery driver you...
- Are an independent contractor that is classified as self-employed.
- Will receive either form 1099-MISC or from 1099-K from companies you drove for.
- Will owe self-employment taxes on all earnings for the previous year, in this case, 2017.
Now, let's talk a little bit about how you can help offset your earnings through deductions.As you probably know by now maintenance, insurance, gas, parking & tolls all add up and the company or companies you're driving for aren't covering these costs!What can you do?Deduct these expenses from your earnings of course! As an independent contractor, you have the ability to take the standard deduction or itemize all expenses associated with operating your business!This helps tremendously when it comes time to pay taxes. Instead of paying taxes on total earnings, you're given the opportunity to deduct your operating costs just like a business and pay taxes on the net profit.One of the best ways to take advantage of this ability is to track your mileage and take the Standard Mileage Deduction Rate for each mile driven - which is $0.545 for 2018. (Note: 2017 standard mileage deduction rate is $0.535)As an example. If you drive 10,000 miles in 2018 that's a $5,450 deduction!
This is why we created Everlance, to help people just like you track your mileage & expenses to make tax time easier. The average Everlance user saves over $6,500 per year just by using our product to automatically track their mileage.In addition, you can take pictures of receipts or input expenses & revenue manually. Everlance will save image receipts forever, so there's no worry there - everything is stored safely in the cloud.At the end of the year, just export your data and import it into your favorite tax software or hand over to your tax pro and you're done!If you upgrade to Everlance pro ($5/mo) you can add your bank account and Everlance will automatically add in your expenses and revenue, making your job of adding & calculating expenses seamless.You can download Everlance (iOS & Android) for free and get started immediately.