I’m not going to lie, I actually enjoy doing my taxes every year. Also, if you couldn’t tell by now, figuring out loopholes and ways to legally game the tax system are two things that give me a weird sense of satisfaction. The US tax code is long, boring and complex though, so for people with actual lives, it kind of sucks.
Now that Uber and Lyft 1099s have arrived, I wanted to present what I’ve learned and give you all the information you’ll need to get your taxes done right. I’m going to help you with everything from navigating the maze of 1099’s to figuring out which tax deductions you can take and even which software or CPA to use.
Let’s get started:
1099-K vs 1099-Misc
Uber and Lyft both consider themselves third party payment processors. I’m familiar with this term because I used to accept Paypal payments with one of my old businesses and only in years where I made over $20,000 and did 200 transactions would I receive a 1099-K.
A third party payment processor is essentially a company that facilitates payments between consumers and business owners. So that’s why you see companies like Paypal, Amazon Payments and Square label themselves as third party payment processors.
Now obviously Lyft and Uber do a whole lot more than facilitate payments, but this is the distinction they’ve decided to go with. This won’t affect the amount you pay in taxes but it will make things a little more complicated.
Here’s a video I recorded with some more detail on 1099s.
Uber voluntarily sends out 1099-K’s to all drivers regardless of whether or not you hit the $20,000/200 ride threshold. So every single Uber driver will get a 1099-K regardless of how much money you made.
If you made over $600 in referral bonuses or miscellaneous income, then you will also receive a 1099-MISC. The 1099-MISC is pretty straightforward: whatever number appears there is the amount you made and will be combined with the gross fares from your 1099-K.
Now where it gets confusing is with the 1099-K since Uber reports gross fares including all of their fees/tolls/etc. All you need to do though is combine the number on your 1099-K and/or 1099-Misc and that is the total that will go down as your income on your Schedule C.
Now I know what you’re thinking. That number is a lot higher than what you actually made and you’re 100% right. In order to get your true earnings, you will now have to sum up the expenses from your 1099 Summary Page (that can be accessed under Tax Information’ on your Uber Dashboard).
Tolls, split fare fees and safe ride fees will be listed as both earnings and expenses. Since they are already included in the income portion of your Schedule C, you will combine them with the device subscription fee and Uber fee in order to get your total expenses. That number will be entered on line 10 of your Schedule C – “Commissions and Fees”.
If you’d like to do one final sanity check, you can easily add up all of your payouts from your partner statements throughout the year and that number should equal (or be very close, mine was off by 1 cent for some reason) your ‘Total Income (1099-K gross fares + 1099-MISC)’ – ‘Commission and fees (all of Uber’s fees listed on the 1099-K Summary)’.
Now I know some people (including myself at one point) have stated that you can just enter the sum of your partner payment statements on your Schedule C as your total income. But while this would produce the same final net profit, it could cause a mismatch with the number Uber reports to the IRS as your total income, so that method is not advised.
Lyft handled their 1099-MISC the exact same way as Uber: drivers who earned over $600 in bonuses, mentor rides, etc received one. But they actually adhered to the $20,000/200 transaction limit 1099-K limit. So if you did not meet those thresholds, you will not receive a 1099-K.
That means that most of you will not be receiving a 1099-K from Lyft but remember you still have to pay taxes on that money. In order to correctly report your income, you’ll need to head over to Lyft’s tax summary page and there you’ll see your gross ride earnings, Lyft commission and tolls paid. Note that Lyft does not include the trust and safety fee like Uber so you can ignore this number completely.
The process is pretty simple from here since you will take your gross ride earnings and add that to your 1099-MISC earnings (if you got one) and enter that as income on your Schedule C. Then add up Lyft’s commission and tolls paid and enter that in line 10 of your Schedule C – ‘Commission and fees’.
Driving For Lyft And Uber
If you’ve been following my advice over the past year, you probably drove for more than one TNC last year. If that’s the case, you still only have to file one Schedule C but you will need to combine the income from Lyft and Uber on your Schedule C and combine the commission and fees from Lyft and Uber too. Just make sure you account for the correct expenses as detailed above.
Since Uber and Lyft are all considered the same ‘rideshare driving business’, you only need to fill out one Schedule C. If you also did delivery, technically you’re supposed to do a separate Schedule C but I’d speak to a tax professional about that. You could probably argue that since Uber now offers UberEats for example, your business is really more providing ‘logistic services’ than rideshare or delivery type services.
And yes I did just make up the term ‘logistic services’ so use that at your own risk 🙂
Standard Mileage Rate
I talked about standard mileage rate vs actual expense method in episode 2 of the podcast but for most of you, the standard mileage rate will likely make more financial sense. Just note that if you opt for the standard mileage rate, you must choose to use that in the first year the car is used as a business. In later years, you can then choose either method. (Thanks to user jbkilluh for this information).
For 2015, the standard mileage rate was 57.5 cents per mile (for the 2016 tax year, it drops down to 54 cents per mile) and that basically includes all of the costs to operate your vehicle: gas, depreciation, oil changes, maintenance, repairs, etc.
Remember, the actual cost to own and operate your vehicle is not 57.5 cents per mile. That is the deduction amount that you will get from the IRS. Your actual cost should be a whole lot less, especially if you want to be profitable as a rideshare driver.
Uber actually provides the total number of miles you drove while on a trip in your 1099-K summary. Lyft provides your total number of miles while you were logged in to driver mode. If you don’t have any records of mileage, you may be able to go off of this, but it’s very important to keep your own logs.
The three most important rules when dealing with the IRS are documentation, documentation and documentation. I try to document the starting mileage every time I leave the house to rideshare drive and the ending mileage every time I get home. So if you didn’t keep this type of detailed records, then your next best bet is to use the mileage totals from Uber and Lyft.
- Other expenses like car washes, cell phone use, candy/water/etc, Spotify membership, Bluetooth, Trunk Organizers, etc may be deductible too as long as they are ‘ordinary and necessary‘.
- The only thing you’ll need to watch out for is with deductions like a cell phone that may be used for personal and business use. Generally, you will need to allocate between personal/business use, so if you use the phone 50% of the time for business and 50% of the time for personal, then you would only be able to deduct half of the cost of the phone and monthly subscription.
- Here’s a good resource from Starzyk CPA if you want to learn about some more tax deductible expenses: Everything You Need To Know About Rideshare Taxes
- Uber Accounting: How To Track Your Taxes And Expenses Using Spreadsheets Tax Filing Software
QuickBooks Self-Employed/TurboTax Bundle
I’m a little biased here because I have been using TurboTax for the past 11 years. And now that I’ve also been using QuickBooks Self-Employed to track my driving income and expenses, this year I plan on filing my taxes using the QuickBooks Self-Employed Tax Bundle, which combines QBSE with TurboTax Home & Business (the version you’ll need to file your ridesharing taxes). Now I can just export all of my ridesharing deductions from QBSE directly into TurboTax vs. starting from scratch.
You can still buy TurboTax by itself, which will run about $120 for both the Federal and State return but if you get the Bundle, you can get QuickBooks Self-Employed + TurboTax Home & Business for just $11.99 a month. So the bundle is a pretty good deal actually.
If you don’t want the bundle and just want to get TurboTax Home & Business, please consider using my affiliate link. I will get a small cut out of any purchase you make.
H&R Block Online Software
I haven’t ever used H&R Block for my taxes but I do have several friends who use the software and find that it’s very similar to TurboTax but at a lower price point. H&R Block also has all of the same auto-import features and both services can actually import each other’s returns from prior years so switching shouldn’t be much of a hassle.
If you end up using H&R Block for your taxes, please consider using my affiliate link. I will get a small cut out of any purchase you make.
Here’s a quick reference guide that was given to H&R Block tax preparers to deal with Uber drivers.
Should I Hire A CPA?
This is a question that comes up every year for me but I think for most drivers doing it yourself is probably the best option. I know a lot of people like to go to local tax preparers (like your local H&R block office) but these preparers aren’t really specialists. You have access to pretty much the same software that they do and since the software will walk you through everything, you might as well do it yourself, in my opinion.
But if you know of a CPA or a tax preparer that specializes in 1099 employment, entrepreneurs or self-employed business owners, it could save you a lot of hassle and money by going to them. Taxes are a very specialized field and there are a lot of nuances that go along with each discipline.
If you’re wondering what your fellow drivers do when they file their taxes, here’s a survey I sent out at the beginning of the year:
Frequently Asked Questions
Why is the amount on my 1099-K from Uber higher than what I earned last year?
Since Uber considers themselves a third party payment processor, the amount shown on your 1099-K is going to include the amount you earned plus Uber’s commission, tolls, etc. So it’s up to you to subtract out the fees and tolls using the example above.
Why didn’t Lyft send me a 1099?
If you made less than $20,000 and 200 rides, you won’t receive a 1099-K from Lyft. You still need to pay taxes on the money you made though, so head to your Lyft summary page and get the info you need there to do your taxes.
What is the business code for Uber and Lyft for my Schedule C?
For Uber & Lyft use: 485300 Taxi & Limousine Service
Business codes are used by the IRS to categorize your business for statistical purposes only. The code you enter will not affect the outcome of your tax return.
Readers, do you now have everything you need to go out and do your own taxes? Are there any tax questions you still have or things I missed?
Disclaimer: This article is meant for informational purposes only! You should talk to a CPA about your own individual tax situation or pay a licensed professional.
Update: If you opt for the standard mileage rate, you must choose to use that in the first year the car is used as a business. In later years, you can then choose either method. (h/t to jbkilluh)
Don't Get Burned On Long Distance Trips.Automatically track your miles on the return trip with QuickBooks Self-Employed. Deduct the miles there and back.
-Harry @ RSG
Latest posts by Harry Campbell (see all)
- RSG046: Why Mindset Matters Most For New Uber Drivers - September 23, 2016
- RSG046: Why Mindset Matters Most For New Uber Drivers (Transcript) - September 23, 2016
- How To Maximize Your DoorDash Cash - September 21, 2016