- So in one of my recent videos
talking about tax deductions,
I asked about any specific questions
that people might have related to taxes, et cetera.
And I had a lot of people asking about
how to file your 1099 taxes properly,
or specifically, taxes associated with being a Uber driver
or doing DoorDash or other related services.
If you haven't seen that other video already,
I'll go ahead and put a card up in the corner.
It covers the most important tax deductions
that freelancers should be aware of.
Now, generally speaking, topics like this
aren't really covered in school,
and this gig economy is honestly a very new thing.
So there's not too many resources available,
and it kind of leaves a lot of people stuck,
not knowing, you know, exactly what to do.
Not to mention, if you don't know
how these different things work related
to deductions, et cetera,
you could end up paying thousands of dollars in taxes
or penalties that you wouldn't have to pay otherwise
if you were aware of this different information.
Now real quick, guys, I just have to mention
that I am not a tax advisor or a financial advisor.
You know, I'm just a guy on the internet
who has been involved in his own businesses
for the last five years.
But you should always talk to a tax professional
about anything related to your own tax situation.
That being said, let's jump into it
and talk about taxes related to 1099 income.
So just to get this out of the way here, guys,
if you earn more than $600 from Uber or DoorDash
or any 1099 income source,
that is going to be reported to the IRS,
and you're going to have to pay taxes on that.
Basically, the IRS is going to get a record
of how much money you earned from this source,
so it's up to you to also report that,
and then pay the taxes owed on that income.
If you earn less than $600, they may not send a 1099,
and it's up to you if you report that or not.
But just understand that you are technically supposed
to report any amount of income in order to pay taxes on it.
However, if you did get a 1099,
you really should report that
because it's very easy for the IRS
to cross-reference their documents
versus the ones you've supplied
and be able to tell if something is missing.
Also, as a side note, when working these different gigs,
one of the downsides is that you're usually
not setting aside any money for your taxes.
So when you work a traditional job,
you typically have your base amount of pay,
and then you'll get some benefits, as well,
but the amount of money that you take home
is often a decent amount less than what your salary is,
and that is because of the money being set aside
for things like a 401K, maybe,
but largely, it's going to be taxes.
So it's definitely recommended to set aside
around 25% of all of the money that you're earning
from 1099 sources, to set this aside
for your tax bill at the end of the year.
However, one thing that a lot of people don't know either
is that you should also be making
quarterly estimated payments based on, you know,
the money that you have coming in that you owe taxes on.
Now, as a business owner myself
who's been doing this stuff full-time for over four years
going on five now,
I will tell you that making those quarterly payments
is honestly a really solid idea
because it's gonna keep you better on track for taxes
at the end of the year.
A lot of people don't pay any estimateds,
and they don't set aside any of their money for taxes,
and they end up getting slammed at the end of the year
with a very hefty tax bill.
So if you are expecting to owe the IRS, you know,
a couple grand or more in taxes,
you're supposed to be making quarterly estimated payments,
and those payments are due on April 15th, June 15th,
September 15th, and January 15th for the previous quarter.
Now, even with the sheer number of gig workers
out there today,
it's honestly quite astounding
how few people actually know about this,
and also how few people are even setting aside money
to pay taxes at the end of the year.
So now that we covered that here,
let's talk about the actual process of filing your return
and what documents you should expect to get
from Uber or DoorDash, et cetera.
Well, if you're working for Uber or DoorDash,
you're going to be receiving a 1099K
and possibly a 1099-Miscellaneous or 1099-NEC
or Non-Employee Compensation.
And of course, you're going to want to make sure
that you're documenting and reporting
every 1099 that you receive.
So now you have these 1099 forms,
but where exactly are you supposed to report this?
That's actually going to go on Schedule C of Form 1040
on your tax return,
and this is where you report your profits and losses
from your business.
This is also where you're going to account
for any deductions related to your business.
Keep in mind, if you guys want to learn more about those,
there is that video in the corner about tax deductions.
But now we're gonna cover a couple
of specific tax deductions related to ride sharing
or delivery services that you should be aware of.
And just so you guys fully understand,
deductions are basically expenses
related to operating this business,
and then you don't end up paying taxes
on that dollar amount of money.
So for example, if you had $5,000 of 1099 income,
but then you had $1,000 of deductions,
you would only pay taxes on $4,000 of that $5,000.
So that being said,
here are the key tax deductions to be aware of.
Number one is any Uber or Lyft fees or commissions
or tolls that are paid,
and this is visible in your dashboard, typically,
when using these different apps.
Number two, if you provide any snacks
or refreshments for your passengers,
hang on to those receipts
because you can write that off, as well.
Number three, you are able to write off
a portion of your phone bill,
since you are required to use your phone
for business purposes
in order to use these different apps to make money.
Now, how much of that bill you write off
is largely up to you.
It's supposed to be about the percentage of time
you're using that phone for business purposes
versus using it for personal,
or what you might decide to do, as well,
if you're doing this on a larger scale
is getting a separate phone just for business purposes,
and then you can do a full write off of that phone plan,
assuming that you're only using that phone
for business purposes.
If not, what a lot of people do
is they'll write off 50% of their phone bill,
seeing as it's about maybe half the time they're using it
for business purposes versus personal use.
So the next deductions to be aware of
are any accessories that you may have put into your vehicle
for, you know, in particular, ride sharing.
This could include charging cords, lights,
seat covers, et cetera.
And if you have to replace any of those,
again, any of those expenses can be deductions.
Next up, if you are using any type
of mileage-tracking software
where you have to pay for a subscription,
that can also be fully deducted.
And then lastly, on that topic of mileage,
the most important one is the standard mileage deduction
of 58 and 1/2 cents per mile.
Now you are going to want to keep a mileage log,
and you should be able to get this from your Uber app
to figure out how many miles you've driven
for them in a given year.
But you are able to take that deduction per mile driven
for either Uber or any of these delivery services.
Now lastly, in that Form 1040,
you're going to end up calculating your net earnings
from self-employment by subtracting your expenses
from your gross income.
So as mentioned earlier,
you have your total income from your gig,
whatever you're doing on the side here,
whether it's maybe Uber or Lyft, et cetera,
then you have your expenses or your deductions,
which come off the top.
And it's that lesser amount of money
that you end up paying taxes on.
And this number is going to need to be put into Schedule SE
of the same 1040 to calculate your self-employment tax.
Now if all of this here sounds really complicated,
it's because it honestly really is.
And don't worry, you're not alone in this
because there's literally millions of gig workers out there
figuring out these things at the same time as you.
And obviously, as you can see here,
if somebody who is driving for Lyft or Uber
is unaware of deductions, for example,
they could end up paying a heck of a lot more in taxes
for no reason.
So I recently partnered with a company called Thrive,
which is aiming to basically fill this gap here
in helping out these freelancers and gig workers
that are popping up all over the place.
Thrive is going to be a one-stop shop
for all of your freelance needs,
and they're going to be offering free automated
quarterly and annual tax filings on your behalf.
So they're gonna be able to help you
with that whole part of the equation
to make sure that you're paying in your estimated taxes
and you're not getting hit with penalties
or a huge tax bill at the end of the year.
So right now, guys, there is a wait list for Thrive.
If you wanna check it out,
the link is down in the description below,
but they're gonna be offering a ton of awesome services
geared towards gig workers and freelancers,
helping you with very complicated things
such as tax deductions, quarterly filings, et cetera.
But anyways, guys, that's gonna wrap up this video.
Those are the basics of filing 1099 taxes properly,
specifically talking about Uber, DoorDash, et cetera.
If you guys enjoyed this video, make sure you drop a like
and subscribe to be notified of any future videos.
And again, if you have any other tax-related
or business-related questions
where you want me to cover that in a future video,
please leave me a comment down in the description below.
Be sure to check out Thrive
and sign up for that wait list down in the description.
They're also going to be doing a ton of free giveaways
for people on that wait list,
so you may want to check that out.
But thanks so much for tuning in, guys,
and I will see you in the next video.