Tax Implications of Being A Rideshare Driver
Jan 12, 2016
You may have booked a ride on your smartphone using Uber, Lyft or another rideshare or private driver service. These services allow passengers to experience something more than what a traditional taxi cab may offer. For many, the attraction of such employment is the flexibility and ability to be your own boss. As a result, many of these drivers are supplementing their income to cover housing, education, etc. What are the tax effects for these self-employed drivers? Here are some important points to consider:
You are now the proud owner of your own business. You can make your own hours and work for yourself. However, you will need to remember the income you earn is subject to self-employment and may be taxed at a 15.3% self-employment rate.
In addition, you will receive a Form 1099 in January. This form will depict the income earned while driving. This income will be reported on your Schedule C of your federal income tax return. Please note, it does not have any federal, state, or local taxes withheld. You may lessen the amount of taxes owed on April 15th by paying quarterly estimated tax payments. Or, if you have another job where you receive a W-2, you can have that employer increase your withholdings to help cover the taxes to be owed related to your Form 1099.
In addition, remember to keep good records related to your business expenses. When you make purchases for gas, car washes, etc. you should keep your receipts to document these business deductions. In addition, it is important to keep a record of the miles driven while conducting your business.
When taking on any business venture which allows you to be your own boss, it makes way for additional complexities on your tax return. It is important to anticipate your tax liability and keep good documentation to allow for smooth accounting of these business ventures.
Kristin Metzger, CPA
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