As an Independent contractor, whether that means you are driving for a delivery service, running your own business, or are self-employed, your taxes are NOT being withheld from your paycheck. Instead, this is something you will need to calculate based on your Gross Earnings found in your 1099 Form.
For any business or client that you have received over $600 from in the taxable year, you will be required to have them send you a 1099-MISC Form. Most rideshare and delivery drivers will receive their form before January 31st.
Now, the most important part of this form is Box 1 which is called, “Nonemployee Compensation.” This box reports the total earnings from your rideshare or delivery service. For example, if you earned $1000 driving for Doordash, this income will be recorded here. This is also called your ‘Gross earnings’, which brings us to our first step for filing your taxes:
Your Schedule C (Form 1040 or 1040-SR) will look something like this:
If you are using a Tax Professional, you will need to provide your accountant with your 1099 Form. You will also need to provide your accountant with any Tax deductions you would like to make. This information should be saved for at least 6 years.
If you’re using tax software, simply input your total earnings from Box 7. Most software will ask you for any Tax deductions you would like to make and calculate what you owe based on the information you provide.
Enter your Gross Earnings from Box 7 of your 1099 Form into Part I, Line 1 of your Schedule C as highlighted in the image below. (Wondering where you find your Schedule C? Click here)
Whether you work in ridesharing, real estate, sales, delivery, medicine, or any other number of fields as a self-employed individual that requires driving, you should be tracking all of your work-related mileage. Come tax season, this can save you a lot of that hard-earned money! (If you haven’t been using Everlance to track your Mileage, learn how to get started here!)
Pro tip: When reporting your mileage, you will need to decide if you will be using the Standard IRS Mileage Rate or deduct Actual Expenses.
You can think of the Standard IRS Mileage Rate, which is .575 cents for business purposes for the 2020 tax year, as the average cost to use your car. This includes the cost of maintenance, petrol, car payments, car insurance, and depreciation (this tends to be the easiest and most beneficial)
Actual Expenses factored into vehicle tax write-offs include interest on a car loan, registration fees, lease, and rental payments, insurance, gas, repairs, regular maintenance, personal property taxes, and depreciation.
It is important to note that you cannot use both methods.
Now, back to reporting your Mile and Expenses…
If you are using a Tax Pro and have been tracking your Mileage (whether that be with an app or manually) you will need to supply your Accountant with your reports. If you have been taking advantage of Everlance, you can send your Everlance Mileage and Expense exports directly to your Accountant from the Web Dashboard here. Or you can generate your Data Exports and send them to your accountant as an attachment. Your Accountant will most likely decide which deduction method is best for you.
Most software programs will ask you for your odometer reading, and mileage for business-related trips as well as non-business-related trips. If you have been taking advantage of Everlance, you will find your total Work and Personal Mileage in the summary of your Data Export. It may also ask a number of questions to help find any Tax Breaks you may have. It will then take this information along with your Gross earning to calculate what you owe.
Part II of your Schedule C is where you will enter any expenses you would like to claim as deductions, for rideshare and delivery drivers, these can include things like hot bags, waters, mints, phone plans, anything that makes you the great delivery driver you are!
Part IV on your Schedule C is where you will enter your Work Mileage. If you have been taking advantage of Everlance, you will find your total Work and Personal Mileage in the summary of your Data Export.
From there, you’ll input your total business profit on the Schedule SE (download your form here) which will determine how much in taxes you’ll pay on your independent income.
And you’re all set! You’ve just filed your taxes!
Your tax situation is unique—just like you! This blog represents generalized tax information and Everlance Support members are not certified tax professionals. If you need help with your specific tax situation, please reach out to your tax advisor.