It's that time of year again when we all start to receive our 1099s for the previous tax year. One of the most important things you need to do is make sure you're paying your taxes.
This blog post will be about how to handle your TaskRabbit 1099 taxes and what steps you can take in order to get everything done correctly. We'll go over self-employment taxes, quarterly taxes, tracking write-offs, and much more.
We'll also touch on some common mistakes people have made with filing their taxes over the years so you can avoid some unnecessary fees.
Note: If you want to track your expenses while you sit back and kick your feet up on the table, Bonsai can help you out. Bonsai's tax software for 1099 workers. Bonsai Tax is a one-stop shop to organize your tax deductions and manage your taxes. All you need to do is sign up for a test drive of the software, and watch as the app tracks all of your business expenses for you. Claim a 14-day free trial here.
Now, let's get into how to properly file your 1099 taxes.
The IRS requires TaskRabbit to send out forms by January 31st so you should receive them around that time. There are a few different forms that are used for reporting the income you made which you may get in the mail--a 1099-NEC, and a 1099-K.
The most common form you'll likely be given is the form 1099-NEC.
The 1099-NEC was replaced by the 1099-MISC many years ago for non-employee compensation, but now the IRS has reintroduced the tax form In 2020, the U.S. made the switch over from the 1099-MISC to the 1099-NEC for non-employee compensation. Essentially, the 1099-NEC did not replace Form 1099-MISC. It just took over the non-employee compensation section of form 1099-MISC. Now, let's dive into when you'll be required to file a 1099-NEC.
There is a simple IRS requirement you'll need to meet in order to receive this tax form.
You'll get an IRS form 1099-NEC, which stands for Non-Employee Compensation, if you made more than $600 while working for TaskRabbit.
You'll get a Form 1099-K if you had more than 200 transactions and earned more than $20.000 last year.
If you received the required transactions or payments (via debit or credit card) from a third-party network, you'll receive a 1099-K. Businesses like TaskRabbit are considered a Payment Settlement Entity. An example of a third-party network would be PayPal.
There are many reasons for why you do not receive a 1099 form in the mail.
You will not be given a form if your TaskRabbit 1099 earnings were under $600. The Internal Revenue Service does not require businesses to send out a form 1099 to independent contractors for payments less than $600.
Your income, however, is still recorded to the IRS, so you must continue to file it.
Another reason why you might not have received a 1099 is that your information, such as your address, is incorrect on your account in the app. Double-check the information on the app if you don't receive your form 1099 and you made more than $600 as an independent contractor. If you need more time to file because you didn't get a form, you can ask for a 1099 extension.
As a TaskRabbit worker who provides handyman services, you are considered an independent contractor aka your own self-employed business. You get to work your own hours, and nobody controls how you get the service done. 1099 Lyft drivers, Uber, Instacart 1099 and other gig workers count as independent contractors as well. A contractor will receive a 1099 while employees would get a W-2 form in the mail to file their taxes.
The taxes an employer is supposed to be withheld from your paycheck will be replaced by yourself when you file your quarterly and pay your annual tax returns.
The self-employment tax rate is made from the Social Security (12.4%%) and Medicare (2.9%) tax rate that individuals pay on their self-employment income. This is in addition to any other taxes they're required to pay.
This will make your total tax liability 15.30%. Again, independent contractors will be held responsible to pay taxes on their business income on their own.
To easily find out the amount you'll pay in taxes, use our free self-employed tax calculator. Many folks recommend you save 30% of the money or the income payments you make from the platform to pay your taxes. You don't want to have any money saved up for when tax season comes.
How much you earn or your income tax bracket determines how much you should save for income tax.
Most people don't like to think about taxes until they receive their return, but if you're not taking care of this year's TaskRabbit expenses now then it'll catch up with you next. We'll walk you through the receipts you should keep along with how to track your business deductions automatically.
One of the mistakes a new contractor often makes is that they forget to file their estimated taxes. The U.S. operates on a pay-as-you-go system and have you pay your taxes four times a year, instead of one payment at the end of the tax year.
Estimated taxes are just like what the name suggests: an estimate of what you owe in taxes.
To file your quarterly tax return, you'll need to calculate the estimated the total amount owed for all four quarters. These payments can be added up by taking your total tax bill from the previous year, and dividing that by four.
Here are the due dates for sending quarterly payments in by:
You can quickly deal with these payments by using the IRS' online direct pay.
It is important to mark your calendar for these dates because if you fail to report or pay your quarterly taxes, you can get some unnecessary fines.
Now, that we spoke about how much money you'll owe to the government, let's get into how to reduce that tax bill with tax write-offs.
You'd want to keep detailed records of all the expenses that come along with operating your freelance business. These business-related expenses can help you reduce your tax bill when you fill out a Schedule C along with your 1099 form.
You'll want to keep receipts for these deductible expenses when you file your tax return after the tax year. When tax season comes around, having a good record of your receipts can make a huge difference in your tax bill.
Check out our full list of 1099 deductions for independent contractors to discover more write offs you can claim on your taxes.
We hope this article was able to take the pain away from filing your TaskRabbit independent contractor taxes. We hope we provided an answer to all the questions you may have about filing your taxes.
If you have any questions about filing your taxes or reporting your income, contact a tax professional for advice. Here's to happy filing!