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.
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?