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!
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.
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:
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.
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.
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:
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.
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?
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.
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.
Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.
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.
Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.
With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.
Why not secure your business today and sign up for a free trial?