Uber has been a popular way for people to make money and earn additional income. However, the Uber 1099 form is not always as clear as it could be when you are trying to file your taxes - so in this article, we will break down what you need to do in order to avoid any penalties from the IRS.
We'll go over the different forms you'll receive, how to pay quarterly taxes, manage contractor tax deductions, and how to properly file your tax return. Let's get into it.
First, let's break down the two tax forms you'll receive as an Uber independent contractor.
There are different requirements for each of these forms, and they are dependent on your earnings as well as the platform where you received payments.
If a company contracts with other drivers, they must send their freelancers (i.e. like Lyft 1099 contractors) a tax document or a 1099 to report their earnings.
The IRS requires that 1099s be sent out by January 31.
The tax documents you'll receive from Uber Technologies Inc. will be either the 1099-K Form and the 1099-NEC. Each tax document will have the annual earnings you made while driving.
The requirements for receiving a 1099-K or 1099-NEC may vary depending on which state you live in. You'll be able to access your 1099-K or a 1099-NEC on your Driver Dashboard.
Let's go over when you'll receive these two tax documents.
The 1099-NEC is an official IRS tax form that summarizes the year's promotion, referral, and other miscellaneous payments. The 1099-NEC replaced the Form 1099-MISC for reporting independent contractor payments in 2020. It didn't fully replace the Form 1099-MISC completely, it just took over the non-employee compensation section for IRS reporting.
This is the most common IRS tax form sent out to Uber drivers. The requirement is fairly simple. Uber will provide you with a 1099-NEC if you received at least $600 in non-rider earnings (i.e. trip promotions or referrals and other miscellaneous payments for the year). This document does not require a ride or delivery to be received. If these requirements are met, you'll be able to download them in the Uber App. Click on the Account tab, head to the Tax Information tab, and then to Tax forms.
Your 1099-K is a tax document issued by the Internal Revenue Service that details your annual on-trip gross earnings.
You may receive a 1099-K instead of a form 1099-NEC for many different reasons like what State you are in, what platform you use for payments, transaction numbers, etc.
You'll receive a 1099-K if you earned more than $20,000 in the previous year in client payments and you provided at least 200 rides or deliveries.
If you received payments from a third party network transactions like PayPal, you may also receive a 1099-K from those platforms.
It should be noted that lower reporting thresholds have been adopted in some states. As a result, you may receive a 1099-K if you earned less than $20,000 in gross income and provided at least 200 rides.
If you are wondering why you didn't get your Uber tax summary documents in the mail, it can be for a few reasons.
If you received at least $600 in non-rider earnings or payments or was paid more than $20,000 in gross income and you didn't receive a tax summary, double-check the address on your account dashboard. The tax form may have been sent to the wrong address because your information was incorrect.
Regardless, if you meet the requirements listed above for 1099s, you should be able to see the tax documents in your Driver Dashboard or download them on drivers.uber.com by January 31.
You will be sent a Form 1099-NEC if you received at least $600 in payments during the tax year. But what about if you made less than that? Will you need to file a 1099 under $600? You may not make receive a form, but you will still owe taxes.
Let's first talk about the tax summary form you'll need to use to file your taxes.
Uber provides an unofficial tax document or tax summary to every driver and delivery worker who uses the Uber app.
This tax summary form shows your gross Uber earnings as well as the bare minimum of deductible business expenses, such as commissions and fees. The tax summaries are a necessary form you'll need and you can access it from the app.
As an Uber independent contractor, you are your own business. So, this means you'll need to file your self-employment taxes or Medicare and Social Security.
The tax rate you'll owe for Social Security and Medicare is 15.3% of your income. Use our 1099 self-employment tax calculator to easily total up how much you'll owe.
If you earned less than $600, you'll still be responsible to pay taxes on the income. Tips are taxable and count as income as well. An exception to pay self-employment taxes is if you made less than $400. In this case, the IRS does not require you to report self-employment income but they do require you to still file your income taxes.
If you don't receive your 1099 information return and you made above $400, then you must still file your taxes. If you don't, you'll pay penalty based on how late you filed your taxes.
As a self-employed business, the IRS requires you to file estimated taxes on your income throughout the year. So, instead of paying your taxes all at once at the end of the year, you'll make a payment four times a year.
To calculate how much you'll pay, all you need to do is take the previous year's total tax liability divide it by four. This is why it is called estimated taxes. You will pay approximations of the tax you payment you made from the previous year.
Mark your calendar, because you'll need to make a payment on these dates:
You can go online and pay directly on the IRS' website with direct pay.
We'll talk about how you can maximize your tax deductions below.
The best way to avoid paying taxes on your 1099 income is to keep detailed records of your business expenses as an Uber driver. You can use these to lower your tax bill owed to the government. A business related expense are costs you carry for operating you business.
So, what can you write off? Well, there are two IRS-approved methods for writing off vehicle expenses. The standard mileage deduction and the actual expenses method. You can only select one. We'll cover both ways to claim car expense deductions.
The IRS introduced this method to simplify writing off vehicle expenses for business owners. It's fairly simple to calculate. I'll show you. The standard mileage rate in 2020 was 57.5 cents per mile.
You don't even have to track miles for taxes because the app does it all for you. All you need to do is head to your Driver Dashboard online and find the total miles you logged for the year. This includes the miles spent waiting for a trip, picking up a passenger, and delivery for Uber Eats or a trip with a rider.
Now, multiply the reported miles online by the deductible rate and you'll get your total tax write-off amount.
Although, this is the easier method, it may not save you the most money. Let's talk about another method an Uber driver can use.
This method requires more work to report your tax deductions. It'll require you to keep detailed receipts for all of your business related expenses.
Here is a list of common deductible business expenses you can claim on your taxes:
Unfortunately, the IRS does not allow Uber drivers to claim a business meal deduction from their taxes.
If you want a way to track your expenses, organize all of your deductible business expenses, estimate your taxes, and help you keep a peace of mind during tax time, try Bonsai's 1099 business expense tracker. Our tax software manages every step of your business from invoices to accounting, so you can focus on earning more money. Try a free trial today.
Read more freelancer tax hacks to lower how much you pay Uncle Sam.
Hopefully we showed all Uber drivers and delivery folks that filing taxes doesn't have to be such drag. Whether you had questions about your 1099-K or what to do if you earned more than $20,000 and did not receive a tax form, we hope this article provided you with all the answers to help you file your Uber 1099 tax return.
Remember, if you have any questions about how your income should be reported, or need tax advice, contact an accountant or tax professional.