It's that time of year again. Tax season. If you're a DoorDash 1099 driver, it's important to know the tax information before filing your taxes. This article will go over what IRS forms you'll receive, business deductions, quarterly taxes, and lastly how to track these expenses in order to save both time and money when doing your taxes.
This is an informative post on how to take care of your DoorDash taxes to save yourself some money this tax season.
Note: If you are looking for an easy solution to track you tax deductions and manage your taxes, try Bonsai Tax. With our expense tracking software, you'll be able to record all your write-offs in one place (on average, users save $5,600 from using our app) and be reminded of filing deadlines. Claim a 14 day free trial today.
When you are a DoorDash independent contractor, you are part of the growing gig economy. There are a few different forms you'll receive. The first form is the 1099-NEC (you used to get a 1099-MISC) and the second one is the 1099-K.
These will be used to identify your tax information on all of the other documents that are provided by DoorDash throughout the year in order to file taxes. The IRS requires companies to deliver or mail these forms by January 31. It could take 3-5 days, so you'll receive a form 1099 within that time frame after February 1st.
There are different requirements for independent contractors to receive each one that we'll break down in the next section.
The majority of DoorDash personal delivery drivers will get this tax form for non-employee compensation. You'll get a form from Doordash's partners, Stripe and Payable.
The requirement to receive this form is if you earned more than $600 in the tax year for your services, you’ll be sent a 1099-NEC form.
In 2020, the IRS has mandated that DoorDash report Dasher income on the new Form 1099-NEC rather than the Form 1099-MISC.
If you didn’t select a delivery method on your account, DoorDash automatically mails and emails your 1099-NEC to the address on file by February 1.
Payable sent out the invitations to file online between January 9th and January 12th in 2020. Through your Payable account online, you can set the delivery preference.
The total earnings or payment information listed on this form do not account for your cash tips, but you'll still need to report that.
If you receive deposits from a partner platform like PayPal, you may receive a tax form 1099-K.
A Dasher would need to have conducted 200 transactions and have a gross volume of $20,000 to meet the 1099-K requirements.
Gross Volume, which in DoorDash's case is the subtotal of payments and tax on processed orders.
However, there is one exception to this rule. If you made more than $600 in total earnings from deliveries in Vermont or Massachusetts, you will receive a 1099-K regardless.
If you meet any of these requirements and you didn't receive a tax form, there are a few reasons why.
Note that just because you do not get a 1099, you will still need to report your income when filing taxes.
All you need to do is contact DoorDash and file a support case.
Dashers need to pay taxes for their earnings on their delivery income; self-employment taxes and income taxes. Before we get into how to lower your tax bill, let's break down each of these,
The self-employment tax is your Medicare and Social Security tax which totals 15.30%.
Dashers will not have their income withheld by the company to pay for these taxes, so you'll need to pay them on your own. If you earn more than $400 as a freelancer, you must pay self-employed taxes.
If earnings were less than $400 in profit, they do not owe self-employment taxes but contractors must still file income taxes.
It is important to go through each form to spot wrong information like how much you earned. After you check your bank information and calculate all the deposits, if it is wrong on the 1099, contact DoorDash immediately.
You can use Bonsai's free online 1099 tax calculator to see how much you'll owe in taxes.
There is a remarkable new deduction for independent contractors who report business income on their personal return. When you freelance for gig companies as a Lyft contractor, Rover, or Instacart 1099 worker, you can take off 20% of your taxable income through the QBI deduction.
Everybody needs to pay income taxes. The money you earn will be subject to the regular income tax rate.
Taxes must be paid either through withholding or anticipated tax payments as you earn or receive income during the year in the U.S.
What this means is that you'll need to pay taxes every quarter.
If overestimated how much money you'll make this year, then you'll receive a refund. There are also penalties for underpaying or missing your estimated taxes. Here are the due dates for when Dashers need to file these taxes.
Note: If you want to be reminded about your quarterly tax deadlines and also track your expenses/tax deductions, try Bonsai Tax. Our tax software for freelancers has everything you need to manage and file your 1099 taxes. Claim your 14-day free trial here.
You can easily send your tax payments to the IRS via direct pay.
A perk of being a Dasher or independent contractor is you can claim tax write-offs to lower your taxable income, and legally avoid paying 1099 taxes. These are expenses related to being a 1099 delivery driver. These expenses can be claimed as tax deductions from your tax bill when they year ends.
it is vitally important to keep a clean record of these expenses and to take advantage of what you can. The contractor's profit or loss is calculated using Schedule C. We'll walk you through the steps of filing your Form 1040 and Schedule C with the Internal Revenue Service.
Only your net profit as an independent contractor is your taxable income. You can track your expenses by using our free 1099 excel template.
Here is a list of common tax deductions self-employed DoorDash drivers can claim on your Schedule C:
If you need help filling out your Schedule-C, talk to an accountant or tax professional.
Remember, if you use a personal car for dashing, you can only pick one IRS-approved method to report vehicle expenses; the actual expense method or the standard mileage method.
I'll cover the difference between each one and offer advice on which one you should use.
Note: Learn more how we can automatically organize and track all your tax deductions for you. See for yourself why freelancers are raving about our tax app. Click here for a 14 day free trial of Bonsai Tax.
The IRS introduced an easy way to deduct vehicle expenses so they wouldn't have to hoard or track their receipts.
This method is called the Standard Mileage Deduction. It's really simple to calculate your deduction. All you need to do is track your mileage for taxes. Take note of how many miles you drove for DoorDash (the app will tell you) and multiply it by the Standard Mileage deduction rate.
In 2020, the rate was 57.5 cents. So, if you drove 5000 miles for DoorDash, your tax deduction would be $2,875.
The actual expense method requires contractors to keep detailed records of their receipts for business-related expenses.
This method will allow you to deduct expenses like gasoline, car repairs, insurance, tire replacements, licenses and registration fees, etc.
Typically, tracking your receipts will result in a higher tax break. Calculate your tax deduction for both methods for yourself to see which one you give you the bigger write-off.
Now that we reviewed the process for dealing with your taxes, you should be able to easily file them and avoid any penalties.
Keep in mind, this article is only for information about dealing with your taxes. Again, if you have any questions about the process or need tax advice, we advise that you contact a tax professional to help you answer any questions.