Introduction
If you’re an Uber Eats/Doordash or Instacart driver, you may have some questions regarding how does tax work with Uber/ Instacart.
It was a little confusing initially because the IRS didn’t give clear directions on reporting your income from these companies. Generally, you would receive a 1099, but where to go from there is very confusing task.
They have since made it easier for drivers to report their earnings, but there’s still some confusion.
In this post, we will break down exactly how taxes work for each food delivery platform, as well as show you how much money you can expect in your paycheck if you drive for one of them:
Deliveroo – 1099-K but doesn’t show up in IRS online.
Deliveroo is a 1099-K company, but they don’t provide you with a 1099-K. If you filed the year with your earnings with the IRS and have used TurboTax or H&R Block to do it, you should be fine.
If not, you can still file your taxes using their online services as usual – remember that when it comes time for them to ask about self-employment income (Schedule C), it won’t include any information from Deliveroo unless they give it to you themselves.
UberEats/Doordash and Instacart- 1099-MISC.
When you do an Uber Eats/Doordash or Instacart delivery, they will give you a 1099-MISC form.
You can find out how much money to include in your taxes using this form. Before we get into that, let’s talk about how the wages from these services are calculated:
UberEats/Doordash: For each delivery, the company takes a flat rate out of your earnings based on mileage and tip. This is not deducted from your paychecks or added onto them; it gets taken out beforehand.
For example, if one hour of driving around town costs $0.20 per mile (plus tolls), then for every mile driven by our imaginary driver Chris Driver, Uber would take $0.20 out of his earnings before paying him anything else, which means he’d earn $10 per hour even though he only worked half an hour.
Since tips aren’t included in this calculation either (they get paid separately), Chris could easily make much more than minimum wage when everything’s said and done!
Instacart: If you’re doing Instacart deliveries with tips included (which most people are), then taxes are calculated differently than they would be otherwise because tips count towards income tax purposes as well as Social Security & Medicare withholdings
This means they must be included on forms like W2s and 1099-MISCs issued by companies like Deliv or DoorDash.
This is why it’s important to know how much you make per delivery. The more you are paid, the fewer taxes you’ll pay, and if you’re making less than minimum wage, then your income tax will be calculated based solely on your tip earnings rather than a combination of both.
UberEats/Instacart tip is counted as a separate line item.
Uber and Instacart include tips on your earnings. Therefore, they are considered part of the income you receive from each transaction.
On the other hand, DoorDash tip is counted as a separate line item because it is not included in your earnings.
Uber and Instacart include tips on your earnings. Therefore, they are considered part of the income you receive from each transaction. DoorDash tip is counted as a separate line item because it is not included in your earnings.
You must have an income of over $600 to receive 1099-MISC
Your earnings, and consequently your 1099-MISC, will depend on several factors:
How many hours do you work? Hours are calculated by the number of miles driven multiplied by the rate per mile for that state or city.
For example, if you work in California and drive 3,000 miles at $0.75 per mile, you’ll make $2,250 before taxes.
Your tax liability depends on how much money is left after subtracting Uber’s commission from a driver’s total annual earnings (this varies between cities). Drivers who don’t work enough hours to receive 1099 can still send an email to Uber requesting one—it’s not mandatory!
Where you reside, in certain places like Illinois or New York City, stricter laws govern what riders can charge customers for their services (and thus less competition).
It may be harder to get as many rides during peak times as rush hour when everyone wants them, but fewer people offer them out of fear they won’t get any back.
The where you are from and how much money you make
State-specific tax rates exist. That means that if you live in New York, where it’s a progressive income tax system, your rate could be different from someone living in California, which has a flat income tax system.
In some states like Washington and Texas, there are no taxes at all—you’ll pay federal taxes. And even within those categories (like New York), there can be differences depending on how much money you make: higher earners pay higher rates than lower ones.
If you’re an employee and self-employed contractor who makes over $600 per year driving for Uber or Instacart, you’ll have to pay self-employment tax on top of regular income tax (whereas most employees don’t).
This can increase your overall taxable income by as much as 15%! But don’t worry; if your employer doesn’t offer any benefits such as health insurance or 401(k) matching contributions, they must deduct 7.65% from every paycheck before sending it to Uncle Sam themself (i.e., Social Security & Medicare Taxes).
Conclusion
As with any job, you should always talk to a professional before filing your taxes. We recommend this site for more information on how to file your uber/doordash income.
If you’re a driver for Uber or DoorDash, the best way to save money on taxes is to take advantage of each company’s benefits.
If they don’t offer any (and most don’t), then you can always go through TurboTax, which will help calculate how much money you owe Uncle Sam at the end of the year
