3 Tax Tips For Rideshare Drivers
If you drive for a rideshare app, you are considered an independent contractor. You need to fully understand what it means to be an independent contractor and make sure that you are keeping documentation of all the right expenses if you want tax time to go smoothly.
Documents to Expect from the Ride Sharing Company
You may get tax documents from the ride sharing company you work for, depending on how much money you can make from the app and how many rides that you give. If you make more than $600 from a ride-sharing app, the ride sharing company is required to send you a Form 1099-MISC. They have to provide 1099-MISC to all contractors that they pay more than $600 dollars to.
If you are a more prolific driver, you may get a different tax form, a 1099-K, which is issued by payment processors and third party network transactions. In that case, you will need to have provided over 200 rides as well as generated at least $20,000 dollars in transactions.
Even if you don't get a tax form from a ride sharing app, you are still responsible for keeping track of the money that you earn and reporting it on your taxes.
Financial Items You Need to Keep Track of
The money that you make from the ride sharing company and that they report back to you is your net earnings. What you need to report to the IRS is your gross earnings, which are your earnings after your expenses are taken out of your earnings.
When you are working for an a rideshare app, you need to keep track of the commission that the ridesharing app takes for each ride that you complete. You also need to keep track of the fee that you pay when you cash out and transfer your money to the bank.
Your phone is an important part of your business as a ride sharing driver. You use your phone to find fairs and essentially run your business. If you have a phone dedicated to your business, you can deduct the entire expense of your phone. If you use a personal phone for business, you can deduct a portion of the expenses. For example, if you use your phone 50% for business, 50% for personal use, you can deduct 50% of the expense of using the phone.
You can also keep deduct the miles that you drive. You'll want to keep a mileage log. Keep in mind that business miles are not just the miles that you drive with a passenger in your car, but the miles that you drive going to pick up a passenger as well.
Also, keep track of your tips. Your tips are taxed differently than regular earnings, so be sure to keep track of them as well.
When it comes time to do your taxes, sit down with a tax accountant and provide them with all of your records that you kept all year of your business mileage, ridesharing fees, payout fees, and other business expenses. They can use all that information to help you do your taxes and make sure that you are not overpaying on your tax bill.
Contact a business like Monheit Zongolowicz Frisch CPAs for professional help.
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