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 a 1099 late filing penalty and owing more taxes than necessary. In this article, we'll go over exactly how to handle your Instacart 1099 self-employment taxes and any costly mistakes that could waste your time or money.
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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.
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.
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 This was made for non-employee compensation and first introduced in the 1980s but became outdated when the IRS added extra space on Form 1099-MISC to disclose payments made to contractors they dealt with throughout the tax period.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.
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.
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: email@example.com, on their website, or you can use the Shopper app.
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.
You use Schedule C 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 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.
A Form 1040 will be required of all taxpayers. This tax form summarizes all of your income, as well as self employment tax deductions and 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.
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 get taxed too).
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.
Whether you are a Shipt 1099 or Instacart grocery delivery driver, there are many tax deductions you can claim. 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.
Note: Automatically track all your receipts and business deductions with the Bonsai tax software. Our app scans your bank/credit card statements to discover tax write-offs you can claim at the end of the year. Try a 14-day free trial here and see how much money you save.
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:
Discover more tax write-offs by checking out our handy 1099 deductions list.
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.
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.
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. Read our full guide for filing estimated taxes.
The due date for estimated taxes are listed below:
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.
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.