How To Handle Your Instacart 1099 Taxes Like A Pro

6 Min Read

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.

Being an Instacart 1099 personal delivery driver can be a great way to earn some extra cash. On average, shoppers can make an extra $200 to $500 per week from freelancing through this app.

As a 1099 shopper, you'll need to learn how to manage your taxes.

After the new year starts, you'll receive your tax form in the mail. It's important not to forget about it or you risk owing more taxes than necessary. In this article, we'll go over exactly how to handle your Instacart 1099 self-employment taxes and avoid any costly mistakes that could waste your time or money.

Breaking Down The Tax Forms You'll Get As An Instacart 1099 Delivery Driver

When you deliver personal groceries for Instacart, since your employer can not control how you perform your services, you are not considered an employee but instead an independent contractor. This means you can work your own schedule and you are a freelancer. You'll get a 1099 from the company to reflect this and you will be responsible for keeping track of your earnings as well as reporting them to the IRS.

The form is required to send out 1099 independent contractors or shoppers by January 31st by the IRS. Don't forget to update the address on your Instacart account if you move.

Depending on the platform and how much you earned, you'll get two different forms.

Will I Get A 1099-K or receive a 1099-NEC?

It doesn't matter if you deliver groceries full-time every day or as a part-time store shopper, depending on how much you made from driving and where you received the money, you'll get a different tax form.

Why You Don't Use A 1099-MISC Anymore

The first form, is the 1099-NEC. This was made for non-employee compensation and first introduced in the 1980s but became outdated when the IRS added extra space on Form 1099-MISC to disclose payments made to contractors they dealt with throughout the tax period. The tax form was reintroduced to replace the 1099-MISC for nonemployee compensation in 2021.

The majority of Instacart delivery drivers will receive this 1099 tax form.

When You Will Get Each Form

These two forms are very similar. A 1099-NEC is when you get paid directly from the app or platform. A 1099-K is when they use a third-party payment service such as PayPal or another service they've partnered with.

The Instacart app will give you an idea of how much you made from driving to determine which type of Instacart income forms. If your net earnings are $20,000 or more in the year from driving and you had more than 200 transactions, then you should expect to get the 1099-K Form. However, if you live in Vermont or Massachusetts, you'll receive this form if you earned more than $600 while driving.

What To Do If You Do Not Receive A 1099?

Just because you do not get a 1099, does not mean the IRS will not make you pay self-employment taxes. Some reasons why you did not receive the form are that you earned less than $600 driving. This is because the IRS does not require Instacart to issue you a form if the company paid you under $600 in that tax period.

So, if you received a form, that means you made over $600 through the app.

if your net earnings were less than $400, you don't have to report your self-employed income. However, you still have to file an income tax return.

If you made over $600 (you'll be able to easily check the app to see how much you earned), and you did not receive a 1099, contact Instacart's Shopper support right away. if you lose your 1099, they can be reached via email at: support@instacart.com, on their website, or you can use the Shopper app.

Other Tax Forms You'll Have To Complete Along With Your Instacart 1099

When you file your taxes, you'll need to fill out Schedule C, Schedule SE, and your 1040 tax forms along with the information from your 1099.

Schedule C

Schedule C is for you to report profits and losses/income or expenses. First, fill out Schedule C with the amount you made (as indicated in Box 7 on your Instacart 1099).

Be sure to file separate Schedule C forms for each separate freelance work that you do i.e. if you drive as a Lyft 1099 contractor, for other rideshare apps or do other part-time gigs on the side. The profit you calculate is taxable, and you must declare it on Line 12 of your Form 1040.

Schedule SE

Schedule SE is for self-employed people who either file as a sole proprietor or are otherwise considered a contractor. You'll need to fill out this form and pay the corresponding Social Security and Medicare taxes, which you're required to do even if your Instacart earnings aren't enough to trigger them.

1040

A Form 1040 will be required of all taxpayers. This tax form summarizes all of your income, as well as deductions and tax credits. This information is needed to calculate how much tax you owe. The categories of income, deductions, and credits you intend to claim are broken down using information from numerous other forms. Here are some form 1040 instructions for contractors.

All About Self-Employment Tax

As an independent contractor, you'll need to pay both federal income tax and self-employment tax. Most full-time workers are familiar with paying their "payroll tax," which is a percentage of their earnings they need to chip in for things like Social Security, Medicare, and unemployment insurance.

Since you are working for yourself, this means you'll be responsible for dealing with it. You can calculate how much you owe by using our 1099 calculator.

According to the IRS, if you earned more than $400 this year as an independent contractor through Instacart alone, you are required to pay self-employed taxes (tips count as income too).

Tax Deductions You Can Claim As An Instacart Driver

Being classified as a business owner allows you to deduct your business-related expenses and avoid paying taxes on your 1099 earnings. Let me explain.

By writing off expenses that deals with your driving service, you can lower your taxable income and pay less taxes.

There are many tax deductions you can claim as an Instacart personal shopper. You'll want to be sure to track and take advantage of as many of these business expenses from your income to lower your tax bill.

Common Expenses

The best way to avoid paying taxes on 1099 income is by leveraging tax write-offs. You can lower how much you earned or made from your personal delivery business by deducting any of the following:

Deduct gasoline costs
Car repairs or maintenance
Toll and parking fees
Tickets
Insurance
Car depreciation
Roadside assistance
Write-off cell phone bills
Any purchases you made at the store for inventory, supplies, etc. that are related to your Instacart business

Discover more tax write-offs by checking out our handy 1099 deductions list.

Tracking Miles

If you don't want to keep track of all your receipts, you can opt to take the Standard Mileage Deduction for a simple way to calculate your tax write-off. In 2020, the mileage deduction rate was 57.5 cents. All you would have to do is calculate the total miles (you can find your mileage log for taxes on your Instacart account) you drove that were business-related or for Instacart delivery services and multiply it by the legal rate.

You can even write-off from your taxes the cost of hiring a tax professional if needed - this is optional if you seek out tax advice but highly recommended.

If you are looking for a hands-off approach to dealing with your Instacart 1099 taxes, try Bonsai's 1099 expense tracker to organize your tax deductions online. It's a completely done-for-you solution that will help you track and maximize your deductions for your work as a store shopper or delivery driver.

How Much Money Should You Set Aside?

Most tax professionals recommend to set aside 30% of the payments store shoppers make some delivery services. This can help you cover any additional taxes Instacart may owe you at the end of the year.

If you have any questions about filing your taxes and need tax advice, don't hesitate to reach out to a tax professional.

Make Sure You Pay Your Estimated Taxes

You'll need to pay estimated taxes every quarter for the expected taxes you'll owe.

To figure out your projected quarterly taxes, multiply your entire tax burden for the year (including freelance tax, income tax, and any additional taxes) by four.

Due Dates For Estimated Taxes

The due date for estimated taxes are listed below:

April 15
July 16
October 17
January 15

If you are a Instacart contractor and need help filing your instacart tax forms for the current year or any prior periods, try out our freelancer tax software for 1099 workers.

Conclusion

Now that you know what you should do to make sure you pay your Federal taxes on time. If you need help with Instacart tax forms, contact a professional for assistance.

Use this article to file Instacart's return successfully. Follow these tips and you'll breeze through your taxes when 1099s are due.

What Defines a Verbal Contract?

A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.

Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.

Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.

The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.

Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.

When is a Verbal Agreement Legally Binding?

For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:

Offer and acceptance: An offer is made and accepted by another party involved in the agreement;
Consideration: The involved parties must exchange something of value (money, a service, time, etc), this is known as consideration;
Intention and certainty: All parties must fully understand the terms of the contract and intend to make a legally binding agreement freely; and
Capacity: The parties must have the capacity to legally enter into the contract; they're above age and of a stable mindset.

Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.

How strong is a verbal agreement in court?

Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.

If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.

That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.

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When are verbal agreements not enforceable?

There are some types of contracts which must be in writing.

The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:

The sale of real estate or vehicles
Real estate leases lasting longer than one year.
Property transfer following the death of the owner.
The case of a party agreeing to pay debt for someone else.
Any contract that requires more than a year to fulfil.
A contract involving and exceeding a specified amount of money (which varies by state).

Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.

Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.

How are Verbal Contracts Enforced?

Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?

How can you prove an oral contract?

Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!

If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.

Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.

Written vs Verbal Contracts: What's the Verdict?

Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.

So, ultimately, the question is: written or verbal agreements?

Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.

Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.

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Benefits of written contracts

A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.

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