How to File and Take Care of Your DoorDash 1099 Taxes

7

Min Read

Tom Smery

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 (we'll show you how to automatically do that, with our Bonsai Tax software.).

This is an informative post on how to take care of your DoorDash taxes to save yourself some money this tax season.

The Types Of DoorDash 1099 Forms You'll Receive For Reporting Your Income

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.

When You Will Receive A 1099-NEC

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.

Requirements For A 1099-K

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.

What To Do If You Do Not Get A DoorDash 1099

If you meet any of these requirements and you didn't receive a tax form, there are a few reasons why.

  • There is an error in the business details on your account
  • You made less than $600 from delivery payments. The IRS requires companies to deliver a 1099 tax form if a business paid out a contractor $600 or more. So, Dashers who earned $600 or more within a calendar year will be given a 1099 form

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.

DoorDash Taxes You Need To Pay

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,

Paying The Dreaded Ol' Self-Employment Tax

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.

Qualified Business Income (QBI)

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.

Reporting Your Income Tax

Everybody needs to pay income taxes. The money you earn will be subject to the regular income tax rate.

You Need To Pay Quarterly Taxes As An Independent Contractor

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.

Due Dates To Send Your Payments

  • April 15th
  • June 15th
  • September 15th
  • January 15th (of the following year)

You can easily send your tax payments to the IRS via direct pay.

Tax Deductions You Can Take Advantage Of On Your Schedule C

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 delivery driver or tax deductions.

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.

Here is a list of common tax deductions DoorDash drivers can claim on your Schedule C:

  • Mileage
  • Deduct cell phone bills, accessories (i.e.car charger, phone holder), and cellular data
  • Hot bag (to keep the food warm!)
  • Tolls
  • Parking fees
  • Car insurance/payments
  • Health insurance
  • Gasoline
  • Car maintenance or repair costs

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.

Tracking Miles For DoorDash Taxes

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.

Breakdown Of The Actual Expense Method

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.

It's Time To File Your DoorDash Taxes!

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.

Tom Smery
Tom Smery is a certified CPA for over a decade. In his free time, he writes articles to pass on his expert knowledge on taxes and accounting. Thomas has a wide range of deep knowledge on 1099 taxes, and finance topics. You can find him fishing when he is not preparing taxes for his clients or writing about accounting.

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