When you're a driver for a ride-sharing company such as Uber, Lyft, Sidecar, or other car sharing service, the most important thing to understand about your taxes is that you are probably not an employee of Uber, Lyft or Sidecar. Drivers for these companies are usually independent contractors, a fact that has tax implications, both at filing time and year-round.
Being an independent contractor means that you're self-employed . As far as the ride-share company is concerned, you're the owner of a separate business that it uses to provide driving services. So when you receive a payment, understand that it's not a traditional "paycheck," and likely no taxes have been taken out.
It's up to you to take care of federal and state income taxes, as well as Social Security and Medicare. Combined, these taxes can easily reach 30% to 50% of your income, so make sure to set aside money to pay them.
If you're accepting ride-sharing fares more than occasionally, you may be required to file quarterly estimated income taxes. At tax-filing season each spring, you'll be reporting your self-employment income and expenses on Schedule C, as well as filling out Schedule SE for self-employment tax if your net income from the work is greater than $400.
You can also use TurboTax Live where tax experts are available on-demand via one-way video throughout the TurboTax experience. Not only do they provide personalized advice and answers, but also a one-on-one review of your tax return – including the ability to sign and file if needed – so that your taxes are done right.
Since you're an independent business owner, just about any money you spend on your gig as a ride-share driver will be a tax-deductible business expense. The first thing that probably comes to mind is your car. There are two ways to take a deduction for the business use of your car:
If you use your car for both ride-sharing and personal transportation, you can deduct only the portion of your expenses that apply to the business use. And whichever type of deduction you claim, it's critical that you keep thorough records. The IRS could disallow any tax deductions you can't support with:
Commissions you pay to the ride-share company are a business expense, as is any cost you may have to pay for technology installed in your car. Other tax deductions include:
In addition, ride-sharing companies typically require use of a smartphone.
As a contractor, you won't get a W-2 form from your ride-share operator, but you likely will receive one or more 1099 forms. Ride-share companies generally distribute these forms according to the same criteria:
If the ride-share operator processed more than 200 transactions and $20,000 in payments for you, then you should get a 1099-K; similarly, if your non-driving income was less than $600, you might not get a 1099-MISC. Even if you don't get any 1099s, however, you are responsible for reporting and paying taxes on all the income you receive.
Remember, with TurboTax Live, there are tax experts available on-demand via one-way video throughout the TurboTax experience that can provide personalized advice and a one-on-one review of your tax return – including the ability to sign and file if needed – so that your taxes are done right.