Are you stressed by taxes? Roadmap to Rideshare Taxes is a helpful, free guide (with step-by-step information!) on how to pay taxes when the IRS treats you like a business. Taxes can be tricky, especially when you’re self-employed, but you don’t have to figure it out on your own.
Today, we’ll walk you through what estimated taxes are, why they are important to rideshare drivers, and what you should be keeping track of throughout the year to minimize any surprises come tax time. We’ll also walk you through the Roadmap to Rideshare Taxes.
Why Is It Important for Rideshare Drivers to Be Informed About Taxes?
If you’re driving for Uber, Lyft or another rideshare company as your main job or even as a side gig, you need to know how to treat that money when it comes to tax time. It’s different from filing your regular personal taxes that you’re likely used to.
We have a tax guide for Uber and Lyft drivers that we update every year with the latest information – make sure to check that out! But basically, every year by the end of January, Uber and Lyft send out 1099s for the prior tax year that detail how much you made, what fees they took out and the miles you drove. And since drivers are independent contractors, all that means for your taxes is that you’ll have to file a Schedule C in addition to your 1040. Don’t be alarmed if you don’t get one of these forms. Depending on how much you earned, this information may only be available through your driver dashboard.
So, take the time and learn about what it means for you as a rideshare driver to file your taxes. You could even end up owing less than you originally thought or you might be able to deduct more than you thought. You could even be like Jay, who earned $120,000 as a driver and only paid $4,000 in taxes since he aggressively kept track of his expenses!
What Are Estimated Taxes?
First things first. What are estimated taxes? The short answer is that they are what you’re estimating you owe in taxes for the quarter or year. Since Uber and Lyft don’t take taxes out of your earnings, you need to set aside what you might owe in taxes so it’s not a surprise when they are due.
If you’re doing this full time, you might be required to pay estimated taxes quarterly. According to RideshareTaxHelp.com, “If you expect to owe more than $1,000 in taxes (that’s earning roughly $5,000 in self-employment income), then you are required to pay estimated taxes.”
One great way to check how much you’ll owe in estimated taxes is to use this estimated tax calculator. You’ll start off with the basics of how you’re filing and how much you earn as a self-employed person:
If you earn with both Uber and Lyft or even add DoorDash, Postmates, Caviar or any other delivery companies, you’ll want to add those earnings up because you’ll need to pay estimated taxes on all of your earnings, not just the ones where you earn the most.
If you or spouse earns a salary on top of your rideshare earnings, you may not owe estimated taxes because what you are taking out for taxes from your paychecks along with your mileage deductions might be enough to offset your taxes owed. But don’t count on this! Use the calculator to see what it estimates for you.
Once you learn what you will likely owe, use the following chart to know when to pay your estimated quarterly taxes:
What Exactly Should Drivers Pay Attention to When It Comes to Taxes?
One of the most important things is to know what you can deduct and start tracking that information immediately — and keep up with it! If you don’t track your deductions, you could end up owing a lot more on your taxes than is necessary. Use this chart to help figure out what you can and cannot deduct as part of your rideshare driving services.
For the most part, you’ll most likely use the standard deduction versus actual expenses for your vehicle(s). Despite that, you still should track all of your expenses so you can make an informed decision.
Utilize apps that help you track all of your expenses related to rideshare driving, such as TripLog, Stride, MileIQ and others. They each have their own quirks and special features. I recommend trying them all out (most should have a free trial) and deciding which is the right one for you and your needs.
What Is the Roadmap to Rideshare Taxes and How Can Drivers Use it?
The Roadmap to Rideshare Taxes lays out the steps you need to take as a rideshare driver to pay your taxes as you go and track your deductions. If you follow the roadmap, you’ll likely be more successful at paying the correct amount of taxes and ensuring you’re deducting everything you should.
This roadmap goes hand-in-hand with their step-by-step guide to filing your taxes. You don’t have to remember everything. This tax cheat sheet shares the essentials you need to know. Rideshare Tax Help also has a tax organizer to help you gather the information you need for filing your taxes properly.
- Figure out the best way to track your deductions and keep up with it.
- Keep a separate bank account or credit card for your driving needs. Use it only for expenses related to your vehicle and rideshare driving.
- Let apps help you out. Use apps like TripLog, Stride, or others to track your mileage as well as expenses. This will make it easier at tax time to gather the information you need.
- Regularly check your driver dashboard where it shows your earnings breakdown. At the end of the year, your tax documents will be housed there.
Doing your rideshare-related taxes doesn’t have to be stressful. Keep track of your mileage and other expenses easily with apps made to help you so you can get the most out of your deductions. And, of course, pay estimated taxes every quarter if your earnings require you to do so — that way you’re following the law and able to pay smaller chunks throughout the year instead of owing a hefty amount all at once.
Drivers, do you currently file quarterly taxes? Do you think the Roadmap to Rideshare Taxes will help you?
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-Paula @ RSG