Your Schedule C, NOT your 1099, is the closest thing you have as an independent contractor to a W-2 when you deliver for gig apps like Grubhub, Postmates, Doordash, Uber Eats and others. It is that form where you put in all your 1099 information and earnings as a delivery professional, then you put in your expenses, determine your profit, and it is that profit that gets moved over to your taxes.
We do spend some time in other articles discussing your income, your 1099 forms, your expenses, and what you can claim. What I want to do here is give an overview of the Schedule C as a whole, and dig into the parts that might cause some confusion when filling it out. If you want greater detail, you can check out the IRS instructions for Schedule C.
Schedule C: Profit or Loss from Business for Contractors with Grubhub, Doordash, Uber Eats, Postmates and others.
Okay, the title doesn’t say ALL of that. But it definitely applies. When you deliver as an independent contractor for these gig companies, this is what it’s about: Determining the profit. It’s the PROFIT, not the money coming in, that is taxable. And sometimes, contractors will end up with a loss.
Entering your personal and business information.
This is lines A through J on the form. Most of this is self explanatory, but let’s talk about a couple of these. Obviously, you start off with your legal name and Social Security Number.
Line A: Describe your business.
This is where you’re going to put a simple phrase that describes what you do. I put down “Third party gig delivery.” The wording isn’t as important, they don’t get too caught up on it, but if your return gets flagged for review it helps a human get a quick look at what it is you are doing.
Line B: Maybe one of the most important parts of this form.
The IRS has two whole pages of business types to choose from. There are a lot of times you can find that more than one actually apply, but you want to try the one that best fits what it is you do. For those of us who do delivery work primarily, we would go under Transportation and Warehousing and choose 492000 Couriers & Messengers. If your income is primarily Rideshare, you would choose 485300 Taxi, limousine, & ridesharing service. Some couriers choose the Rideshare option so it doesn’t confuse them with something like a more structured messenger system. I think they’re close enough that either one works well.
This is extremely important that you find the right classifications. The reason is that the IRS computers will evaluate your deductions for things that look out of line for the type of business that you do. If you choose a business classification where the massive amount of miles we drive is not normal, you increase your risk of audit. 30,000 plus miles can raise a huge red flag for a lot of self employed people, but it’s far more normal when we use our cars to conduct our businesses to the extent that we do.
At the same time, you need to be aware that a lot of office type deductions are less normal, because our work doesn’t typically involve running an office. This is why a lot of people would advise against using the home office deduction: It’s unusual to conduct much business from home.
If you do other types of gig or self employment work that differ from one another just enough, you may be better off treating it as separate businesses. Keep earnings and expenses separately, and file separate Schedule C’s for each one.
Entering your business information.
If you have created a legal name or trade name or DBA for your businss, you would enter it here. That’s not as common for delivery work unless you’ve created an LLC or legal entity. Some will request an EIN for their business to use that rather than their Social Security Number.
If you have a separate address for your business, you would enter the business address on line E. If you use the same address from which you file your taxes, IRS instructions note you do not need to complete that address.
You will be asked about your accounting method. This is almost always going to be “Cash.” If you have to ask what it is, I’m pretty sure it’s cash. You have to know your accounting well enough to use Accrual or any other type of accounting, to the point that you wouldn’t be asking this question.
For the kind of work we do where it’s based on our deliveries, it’s pretty safe to say yes to line G about whether you participated materially. If this is the first year of doing delivery work of this type, check the box on line H. If this is only the first year for a particular platform (say you did Uber Eats the year before and added Grubhub this year) you wouldn’t check that box. You would only mess with I and J if you paid out money to a subcontractor and claimed that money in your expenses.
Next, fill out your Part I (Income) and Part II (Expenses) for your delivery work with Grubhub, Uber Eats, Postmates, Doordash or others.
This gets covered in other articles in this series so I won’t go into detail here. You enter 1099 and other income in Part I and expenses by category in Part II. When it’s all said and done, you subtract your expenses from income to determine profit or loss.
Can you claim business use of your home for line 30?
After you subtract your expenses from your income (line 29) you have one place where you can make an adjustment. That is line 30 where you claim, if allowed, the business use of your home. If it’s legitimate, claim it. If not, don’t. I personally think it’s rare for it to be legitimate for gig delivery work. To claim home office use, your home office has to meet both of these requirements:
- Firstly, it has to be space used exclusively for business. Therefore, you cannot claim your kitchen table. You cannot even claim a home office if it also serves for personal use. It has to be dedicated space for your office.
- Secondly, it has to be used significantly for business. Sitting down a few minutes here or there to do your books doesn’t quite cut it. For most of us, we barely do anything outside the delivery work itself, so we’d have a hard time convincing the IRS that this applies in our business.
Since we generally don’t buy and re-sell items, I’m not covering Part III Cost of Goods Sold.
Part IV: Information on your Vehicle.
Most of us use our cars pretty heavily for delivery. If that is the case and you claim vehicle expenses, you need to fill this section out with information about your car. Do not fill out Part IV for motorcycle, scooter or bicycle expenses. Those are treated differently.
If you used more than one vehicle (such as if you replaced your car during the year or if you switched back and forth between cars), you need to add an attachment with all of the information in Part IV for each additional car.
In part IV, you will be asked when you placed your car in service for business purposes. If this is the first year you file a schedule C, it would be the first day you did any work for which you tracked your mile. You need to enter how many miles you drove the car for business, for commuting, and for other (any personal miles).
Questions 45 and 46 are self explanatory. Did you use your car personally, and do you or your spouse have another car that you use personally? Think about this: What if you claim no personal miles and don’t have another vehicle? Do you think the IRS will believe you didn’t do any personal driving on that vehicle?
Finally, PAY ATTENTION TO QUESTION 47: Do you have evidence to support your deduction? If “Yes” is the evidence written?” You are stating that as of the day you file, you have documentation of your vehicle use. You want to make sure you actually HAVE that documentation.
Wrapping up your schedule C
The last part, Part V, is really an extension of the expenses side. It’s where you’ll list items that didn’t fit into the expense categories listed in Part II.
There’s a lot of information for this form, isn’t there? The bottom line is, it’s all about what did you earn? What did you spend? What’s the difference? The difference is what gets moved to your tax form. That information impacts your self employment tax and your income tax.
The bottom line is, the Schedule C isn’t your taxes. It’s a piece of a larger puzzle. It helps you figure out what of your gig income is actually taxable. Your self employment tax IS based directly on your Schedule C (or if you had multiple businesses, the sum of all your Schedule C’s). If you had a profit on your schedule C, that’s added to all your other taxable income to go into the puzzle for figuring your income tax.
The Delivery Driver’s Tax Information Series
- Introduction to the Delivery Driver’s Tax Information Series
- Your Taxes are Based on your Profits, not Revenue
- Understanding your Revenue: Money In
- Understanding your Expenses: Money Out
- Filling Out Your Taxes
- Preparing for next year: How much should I save?