Common Tax Questions by Rideshare Drivers and Gig Workers

Need a lift?

If you’re like nearly one third of Americans, you probably just answered yes.

Of course, as the number of people utilizing ridesharing services grows, so do the sizes of these companies. Massive companies like Lyft and Uber are planning to go public in 2019, which seems as though it may be the final punctuation mark on the sentence: Rideshare services are here to stay.

And so is the gig economy. The gig economy isn’t just limited to services like Uber and Lyft, but rather, to a host of large and growing companies like Postmates, TaskRabbit, and others. They provide part-time, flexible, and on-demand contract work for their drivers, who put in any number of weekly hours, from just a few to over sixty or seventy.

If you’ve been a gig worker for the past few years, you may have a sense of what that means for your income and taxes when it comes time to file. However, if you’re one of the tens of thousands of new workers driving, delivering food, walking dogs, or performing any number of odd jobs, you may have a few questions.

Which tax forms do you need? What is deductible, and what isn’t?

In the spirit of tax season, we’re here to help walk you through the basics of filing taxes as a rideshare driver. There’s a lot to cover, but it’s actually a lot easier than you may think!

FAQs for Gig Workers and Rideshare Drivers

The rules that apply to your situation may vary based on the type of work you’re performing, from rideshare drivers to other gig workers. However, a lot of the rules will apply to everyone. There’s a lot to learn an

Am I an employee of the company?

No. Although you perform daily or weekly work for your company, for tax purposes, you are legally not considered an employee.

For example, when you begin driving for Lyft, you are considered an independent contractor. This is different than, say, someone who works for Lyft as an accountant. Lyft pays employer payroll taxes, provides health insurance, and pays for other infrastructural accommodations. As a freelance contractor, you may have more flexibility. But this also means Lyft doesn’t pay for things like payroll taxes and health insurance coverage.

What taxes do I owe, and when do I pay them?

As an employee, you indicate the portion of taxes you’d like to have withheld from your taxes each paycheck. Depending how you fill out your tax forms, you may end up owing money on Tax Day, or you may even end up with a hefty refund. As an independent contractor, you’re self-employed—and that means you’re responsible for paying your own taxes.

For example, let’s say you do odd jobs for TaskRabbit. Each time you’re paid, you receive 100% of your earned income. The IRS expects you to report that income, as well as pay income tax and self-employment tax on a quarterly basis.

Which tax forms do I need?

Fortunately, you still use IRS Form 1040 to report your income—just like you would as an employee of a company. There are two other forms you may not be used to, though, that you’ll want to keep in mind if you’re driving for Uber or working for another company on a contract basis.

  • IRS Schedule C, Profit or Loss from Business Use this form to list all your business income and business expenses (more on this later). You’ll only pay tax on profits remaining after you subtract your expenses from your income.
  • 1099-MISC / 1099-K – Since most gig workers are considered self-employed under tax law, they fall under 1099 rules. Rather than receiving a W-2 from your employer, they’ll file a 1099-MISC or 1099-K with the IRS and your state.

Which expenses can I deduct?

While you may be disappointed to find out you can’t deduct any special expenses when working in the gig economy, the nature of your work puts you in a better position to deduct a host of different expenses you might not normally.

For example, people who drive for their income can deduct their car expenses. You can take what’s called “the standard mileage rate” along with a mileage deduction for every business mile you drive. Or, if you lease your car, you can deduct expenses such as gas, repairs, depreciation, and lease expenses.

You may also be able to deduct the following:

  • Candies, gum, or water you stock in your car.
  • Any extra insurance coverage you’re required to maintain for work.
  • Parking and tolls.
  • Fees, commissions, and transaction costs associated with working.

Filing Your Taxes: Rideshare Drivers & Gig Workers

When you’re hustling to earn extra income or maintain a flexible working schedule, the last thing you want is an extra surprise when Tax Day rolls around. Fortunately, you now know what to expect from filing your taxes as gig workers, rideshare drivers, or other contractors! And we give that knowledge five stars.

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