Many individuals choose driving for ridesharing companies such as Uber or Lyft as an additional means to earn extra cash, yet it’s essential that they understand how this work affects taxation.
Rideshare drivers are considered self-employed individuals and must file income taxes accordingly. By maintaining accurate records, rideshare drivers can ensure their taxes are filed accurately.
Taxes
No matter if you drive for Uber or Lyft as part-time job or full-time career, keeping accurate records of income and expenses are vital for filing taxes accurately. Receipting deductions could lower taxable income leaving more money in your wallet such as mileage expenses, Uber/Lyft fees/commissions fees for food/beverages provided to passengers, the cost of phone accessories/phone plans as well as related car accessories expenses etc. Using apps such as Stride Tax or MileIQ are great ways of keeping accurate records accurately.
Rideshare drivers must also pay self-employment (SE) tax. This tax, similar to Social Security and Medicare taxes withheld from employees’ paychecks, amounts to 15.3 percent of your gross income and must be paid regularly.
To file taxes as a rideshare driver, you will require 1099 forms from all companies with whom you worked. Form 1099-K should detail payment card and third-party network income while form 1099-MISC lists miscellaneous income like tips and tolls. Once you have all this information at your disposal, use a tax calculator to estimate profit/loss before compiling a list of expenses for Schedule C filing.
Deductions
Tax deductions available to rideshare drivers to lower their taxable income include vehicle costs, related expenses and mileage expenses; as well as smartphone and wireless data plans costs. It is vitally important that receipts for these expenses be saved to maximize tax deductions and decrease tax bills.
For you to claim the mileage deduction, accurate records must exist of business travel involving mileage. A mileage tracker app or spreadsheet can make this easier; furthermore, purchasing a credit card that offers travel rewards could save you money on airfare and hotels while making it easier to claim mileage deduction.
Rideshare taxes can be complex, which is why it is essential to work with a CPA who understands both the industry and tax code. Seek out CPAs who specialize in rideshare taxes or work with small businesses – ask for references and ask plenty of questions so you get maximum value from your services provider.
An effective tax preparer will keep abreast of all of the latest deductions available to Uber and Lyft drivers, and explain how these can lower taxable income and leave more in your wallet come year-end. Plus, they’ll file both federal and state returns on your behalf – saving time and hassle in doing so!
Expenses
When selecting a Raleigh CPA, be sure to select someone familiar with rideshare taxes. They should know which tax deductions are available to rideshare drivers and any changes that might impact them, plus it would be better if they specialize in this area as they will have more experience and knowledge than someone who doesn’t specialize.
Your first step in filing rideshare taxes should be gathering all expenses associated with operating a rideshare business, before determining how much taxes are due owed from those expenses. An online calculator or consulting with an accountant in Raleigh could assist with this calculation and identify tax deductions available to you for ridesharing activities.
Your daily driving expenses, such as Uber and Lyft fees and commissions, as well as vehicle-related expenses such as snacks for passengers and USB chargers and car mounts can all be deducted on IRS Form Schedule C under cost of operations – either using standard mileage rates (Line 9), or Part II depending on how your expenses are reported.
As your phone is an essential tool in performing your job, its cost should be fully deductible as a business expense. Just ensure that the percentage of time used for business exceeds personal use. Furthermore, other vehicle-related expenses like parking fees and road tolls are tax deductible expenses, as are meals with prospective clients or colleagues to discuss work matters.
Mileage
Maintaining accurate records of your rideshare mileage is a key component to filing taxes and can save thousands in tax deductions! Tracking miles as either a professional Uber driver or delivery driver with Uber Eats delivery service is crucial in order to claim all eligible expenses as tax deductions; however, understanding Uber’s tax structure may be confusing.
As an independent contractor, there are various free tax preparation programs and resources available to them. These resources can assist independent contractors with tax preparation for their rideshare businesses – some even provide a “roadmap to rideshare taxes”, illustrating key steps toward claiming income and deductions.
For a more tailored approach, professional tax preparers offer their services. Professionals will give you a complete breakdown of your situation including estimated payments throughout the year and reviewing deductions to make sure all available tax benefits are claimed.
Once you’ve compiled all of your earnings information from 1099 forms, it’s time to compile all the expense records that will help you file your taxes. Vehicle-related expenses are of particular significance – these can be written off using either the actual expense method or standard mileage rate. With actual expense method you track every expense related to car ownership such as fuel costs, oil changes, repairs maintenance lease payments or depreciation while standard mileage rate simply requires multiplying business miles by an IRS-approved mileage rate.
