It’s January, and you know what that means – tax season is upon us! We all know it’s better to get our taxes done with as soon as possible, for safety reasons, faster returns, and more. But how can you quickly and easily file your rideshare taxes? By being prepared and by using some of the most popular online tax-filing programs! Below, RSG contributor Chonce Maddox Rhea shares some of the most popular ways rideshare drivers file their taxes.
Filing taxes is not everyone’s cup of tea, but it can seem like an even more tedious process when you’re an independent contractor. Working for Uber and Lyft is about more than just driving and getting to keep a flexible schedule. You’re also responsible for paying your own taxes and expenses since rideshare companies won’t deduct this from your pay. However, the great thing about being a contractor is knowing that you can deduct some of your expenses to reduce your taxable income.
Smart rideshare drivers make sure they’re prepared with deductions and paperwork, then they file early. Depending on how complex your tax situation is, you may be able to use one of the affordable online tax-filing programs like H&R Block or TurboTax. Below I’ll outline how to efficiently prepare for your taxes and various ways rideshare drivers file their taxes.
Ready to get started? Use the links below to get started on your taxes:
- Use H&R Block to do your taxes or TurboTax
- Need a tax professional? Sign up and get connected with a Rideshare CPA here
- Don’t forget one of your biggest write offs – mileage! We recommend Stride for tracking miles
- Looking for more tax-filing information? Check out our guide to 2019 taxes here
Common Deductions You Can’t Forget About
As for deductions, you can only take the mileage, parking and tolls or actual expenses (meaning payments, insurance, maintenance, fuel and repairs), but not both. For many drivers, the mileage deduction can offer a much better tax break but it really depends on your situation.
Special licensing or fees to drive for companies are deductible but are also accounted for on the 1099-MISC, so it’s important to pay attention so as to not double-dip.
Anything you as a driver provide to customers, such as snacks or drinks can be deducted. Don’t offer anything to passengers? Get paid to keep snacks and drinks in your car with Cargo.
A portion of the cell phone can be deducted since that’s how most drivers get their fares–but never 100% unless it’s a line specific to the business.
Preparing to File
Preparing to file your taxes may seem like a tedious process but it’s a crucial stage to get organized so things can run smoothly moving forward.
Since I’m a freelancer and my husband drives for Uber and Lyft, we choose to file taxes with a CAP who specializes in self-employment taxes. I asked my CPA, Eric J. Nisall, to offer his 3 top tips that can help rideshare drivers prepare to file their taxes efficiently and here are some of his words of wisdom.
1. “Always keep detailed records of your mileage: the mileage at 1/1 and 12/31 in addition to your business miles. This is because on your tax return you need to list your total annual mileage, business, commuting, and other mileage separately. Having a record of everything makes things easier come tax time as well as gives you solid evidence in case of an audit.”
2. “Have a separate account for your business–put all of your earnings there and use it to pay for your estimated taxes, then move money to your personal account at regular intervals. This will make sure you have enough for your estimated taxes first and also make a clear distinction between your personal money and business which makes your taxes easier to prepare since you won’t have to spend additional time going through your statements and documents to match up your numbers to the 1099-MISC’s you receive”.
3. “Speaking of 1099-MISC’s, make sure you tie out your earnings to the document. You want to make sure that what is being reported on your behalf to the IRS is accurate. Everyone is capable of making mistakes and it is not unheard of to find calculation errors on 1099-MISC forms”.
How to File Your Rideshare Taxes
So let’s talk about filing your taxes. What’s the best option for rideshare drivers?
Many rideshare drivers choose to file their taxes on their own, using programs like H&R Block or TurboTax. We’ll go over how you can do this below, but don’t forget to check out the IRS website and see if you’re eligible to file for free first.
Others have more complex situations or simply prefer the certainty of using a certified public accountant (CPA). It’s up to you which route you go, but here are some things to consider as you move forward in filing your taxes.
Filing Your Own Taxes
Thanks to the simple processes of e-filing, filing your own taxes is now easier than ever. There are many affordable programs to help walk you through the process step-by-step and many options also provide professional support and assistance from real CPAs.
H&R Block has their own online tax filing service where you can even opt in to get assistance from a tax expert, enrolled agent, or CPA. They offer upfront pricing and their basic package is free. The prices go up depending on how complex your situation is.
For freelancers and contractors, H&R Block has an online tax filing package that costs $49.99 plus $36.99 per state filed. However, their $79.99 package will allow you to import Uber driver tax information.
H&R Block’s secure software is straight-forward and easy to use. You can help you import data from your bank, mileage tracker and other expense trackers while helping ensure that you take advantage of the right credits and deductions.
If you drive for both Uber and Lyft, there are at most 6 documents you will need:
- 2 x 1099K
- 2 x 1099 M
- 2 x Tax Summary. Let me show you what they are and what they look like:
If you get a tax refund, you can receive it via direct deposit, paper check, or loaded onto a Prepaid Debit Mastercard.
H&R Block is pretty well-known in the industry so they guarantee that you’ll get the maximum refund that you’re entitled to or your return is free. This means, if you find an error in the H&R Block online tax program that entitles you to a larger refund (or smaller liability), they will refund the fee you paid to file and amend your return at no charge so it’s basically risk-free.
If you happen to receive an IRS or other tax-related notice, H&R Block online will help you understand it and respond at no additional charge.
TurboTax is another popular option you can use to file your taxes online. Both Uber and Lyft offer TurboTax for free to drivers who qualify on the respective partner dashboards. It’s important to note that this is for the online version, but you can pay extra if you prefer to download the software to your computer.
Uber and Lyft send you all your tax documents in January, so it’s easy to upload this information to TurboTax.
Like H&R Block, TurboTax guarantees 100% accuracy when filing your return or they’ll pay you any IRS fees. Their software also searches through over 350 different deductions and credits that you may be eligible for.
Hiring a CPA (certified public accountant) to file your taxes is one of the safest routes to take because accountants know the tax code and some might even specialize in what you are looking for.
For example, if you are a contractor, hiring a CPA to help you manage your tax documents and file each year is a safe move especially if you have a very complex situation that requires an expert’s attention.
Generally, using a CPA to file your taxes can run you anywhere from $250 to $400 depending on your situation so it’s one of the more expensive options. The benefit of having a CPA is knowing that you can go back to the same person year after year and they’ll keep track of all your information. You can ask questions whenever you want and also get reminders to make quarterly estimated tax payments.
When determining the right CPA, you want to try to work with someone who is familiar with your situation and either specializes in taxes for rideshare drivers or has has experience working with other rideshare drivers. It’s best to work with someone who not only knows the tax code well but is also up-to-date on all the deductions drivers can take and h w to file for them correctly. You can also request references and ask plenty of questions to ensure you’re making the right choice.
Some important questions to ask your rideshare CPA include:
- What does your service include and what are your fees?
- How do you bill for your services?
- What is the best way to communicate with you? Online, by email, in person, or other means?
- What specific documents do I need to send you in order to get my estimates and file taxes by the deadline?
- Can you send me regular reminders of when quarterly estimates are due?
- Can you represent me if I get audited by the IRS?
- Do you have references?
Local Tax Prep Office
Another option you have when filing your taxes is to go to a local tax preparation office. There are many popular franchises with trained accountants and tax preparers who can help file all your tax documents.
While the staff at local tax preparation offices are often trained and certified, all of them might not be accountants and their experience may be varied. Also, you probably won’t get to choose who you work with to file your taxes unless you know someone personally and request to meet with them.
As you can see, there are many different routes to take when it comes to filing your taxes and it all depends on your situation and needs. If you have a more complex situation that is difficult to understand and sort through, you might be willing to pay more money and hire an accountant.
If you have some knowledge about tax preparation and deductions and have very simple needs, you might be more willing to try e-filing online.
Whichever option you choose, make sure you store a copy of your tax forms in a safe place each year and go over everything at least two or three times for accuracy.
Looking for more tax preparation information or have more questions? Head over to our Ultimate Tax Guide for Uber & Lyft Drivers here.
Have you filed your taxes this year? Are you using tax software or hiring a CPA?
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-Chone @ RSG