Top 6 Tax Mistakes for Uber, Lyft, and Sidecar Drivers

February 2, 2015 by The Driver 0 Comments

[This is a post written by Derek from SharedEconomyCPA.com. The information contained in this website is meant only for guidance purposes and not as professional legal or tax advice. Further, it does not give personalized legal, tax, investment, or any business advice in general.

For additional tax resources from Rideshare Dashboard, check out my newly launched online course for Uber, Lyft and Sidecar Taxes!]

I’ve spoken to may Rideshare drivers about their tax situation and realized that there are a lot of misconceptions and false facts that are floating around. I compiled a list below of the top 5 tax mistakes in a hope to help clarify taxes and make sure Rideshare drivers aren’t overpaying their taxes while being compliant with IRS rulings.

No 1099, No taxes: This is completely not true. Any income you receive as a self employed worker, either cash or deposited into your account, needs to be accounted for. Just because Uber, Lyft and Sidecar may not send you a 1099doesn’t mean that you don’t have to pay taxes on what you earned from them. [Note: Uber is sending 1099-K if you have completed one trip, and a 1099-MISC if you have any passenger or driver referral bonuses. It is unknown at this time if Lyft will do the same.]
Misunderstanding of EmploymentStatus: As a Rideshare Driver, you are considered a “Business Owner” from a tax perspective and therefore, every dollar that you earn, you are expected to pay taxes on. Often times, people overlook their employment status and mistakenly think that their taxes are already being withheld – this is not the case and you will have to pay taxes on every dollar you make!
Incorrect Tax Filling: When filling your tax returns, all of your income and expenses should be recorded on the Schedule C of your 1040. People often mistake this and put their 1099 income on different forms. When filling your tax return, make sure to record all of your income and expenses on the proper forms to avoid future confusion and having to amend or redo your tax return.
Missing or Incomplete Business Expense Records: As a 1099Independent Contractor, there are numerous tax advantages that you can take and not keeping track of your expenses has been one of the main reasons that people are unable to save money. A tax deduction reduces your taxable income (i.e. the amount of money that you will ultimately be taxed on). Therefore, when receiving 1099income, it’s important to make sure that you keep clean and adequate records to help save you money.
Not Paying Estimated Taxes: If you are a Rideshare driver and expected to owe more than $1,000 in taxes at the end of the year, you will need to pay estimated taxes 4 times a year. If you do not pay estimated taxes, you can be exposed to penalties ranging from 6 to 8 percent. You can see these two posts more for information:
- Don’t Forget your Estimated State Taxes (and city too!)
- Paying Estimated Taxes
Not Saving for Taxes: Since taxes are not being withheld, many Rideshare drivers are surprised and mortified once they realize how much money they owe in taxes at the end of the year. The taxes due should not come as a surprise if you save for them throughout the year. Make sure to set aside a little bit of money from each paycheck to avoid an end of the year scramble to pay taxes. If you have not saved for taxes, make sure to keep track of your business expenses! The easiest app on the market I’ve seen is called Tabby Tax. Their website is www.trytabby.com and they have a free 30 day trial. It’s a must download for anyone trying to save money on their taxes.

Is there anything else you want to add? Is there something you forgot that had to pay for later?

Tuesday, February 3, 2015