Preparing for 1099 taxes
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 forms you receive and what they mean for you and your taxes.
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 and 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, then 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 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.
Did 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.
If 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.
We hope that this guide helped you better understand your 1099, and happy filing!