In the last section, we looked at what the schedule C is. There are three important parts where you fill in your business details related to delivering for Uber Eats, Postmates, Doordash, Grubhub and others.
- What you brought in (revenue)
- What you spent (expenses)
- What’s left over (profit)
Of course, the first two parts are a lot more involved than that. In this article, we’re going to look at the revenue side. This is where we put in the information about what our business made.
The income part of Schedule C asks you to fill out information
When you are filling out this form, it’s going to start out asking how much money you made. There are three totals that you fill in here.
- Gross receipts not from 1099-MISC or W-2. This is any money you earned that wasn’t reported on a 1099-Misc. Money that would go here would include cash tips or money from a company where you didn’t earn enough to receive a 1099.
- From Form 1099-MISC. Postmates, Grubhub, and Doordash along with most other gig platforms use the 1099-Misc form. Uber eats does as well, though they do things a bit differently. If you received more than one 1099-Misc, you add the total of them up and enter that total on this line.
- From Form 1099-K. Of the delivery gigs, Uber Eats is most likely to use the 1099-K. Uber and Lyft also use this form. Again, if you received more than one, add them all up and put the total on this line.
You add all three of these lines up and put your total on the next line.
Now you have your business’s revenue or earnings.
When all is said and done, you’ll enter your expenses next, subtract that from your revenue, and that final total gives you your profit. We’ll go into a lot of detail on the revenue in future episodes.
If you received $600 or more from any of the gig companies who use the 1099-Misc form, they will send a report to you and to the IRS of your earnings. This is not like a W-2, it doesn’t have much information. In fact, most the time you’ll have one number. What they paid you.
Here’s a sample of a 1099-Misc form sent from Doordash:
Notice something here? There’s one number. It’s very simple. It’s listed two places, one for what they call nonemployee compensation and one in the state line. That’s it.
There’s no list of expenses. There’s no break down of tips or anything else. One number. No mileage. And no tax withholding, because they don’t keep taxes out for you. That’s up to you.
Will everyone send a 1099-Misc form?
No. Companies typically do not send out a 1099 form unless you have received $600 or more from them. For example, in 2018 I earned less than $600 from Postmates and did not receive a form from them. Uber Eats does things a bit differently with their 1099’s, sometimes using a 1099-Misc and sometimes using 1099-K (or both).
If you deliver a lot with Uber Eats, you may receive a 1099-K instead of a 1099-Misc, or you could receive both. The same is true if you do rideshare with Lyft or Uber.
Why does Uber Eats use a 1099-K and how is it different?
Several years ago, the IRS discovered that there were a lot of people skating by with unreported income. Perhaps they made their money selling things through eBay or Etsy or selling goods or services through their own website. With no employer, no W-2, and no 1099, they could make money under the table. Thus the government started requiring payment processors to report when any individual received more than $20,000 in payments. Thi sis reported on a 1099-K.
So how does this have anything to do with delivery and gig work?
My take is, it’s all a sham. It’s a charade around trying to make us look like we are independent contractors (I wrote about this more here).
Have you noticed the delivery companies lately saying they aren’t delivery companies? It’s all about legislation like AB5 and keeping independent contractor status. What they are trying to say is that all they are doing is connecting restaurants, diners, and couriers and not actually providing the delivery service. This is because a lot of laws (even before AB5 came around) stated you can’t use independent contractors to perform the primary work of your business. In other words, a delivery company has to use employees, not contractors, to deliver.
Using the 1099-K as a smokescreen
If Uber Eats is paying you directly, that looks more like an employee relationship. But if they make it look like the CUSTOMER is paying you directly (and they just take their commission out of the payment) then that looks more like what they say. Uber Eats now isn’t providing the delivery, they’re facilitating and just processing the payment.
Of course, there’s a problem with that. We aren’t paid based on what the customer pays in. Driver fees are calculated differently than the customer’s delivery fees. I’m not sure how that isn’t fraudulent use of the payment system and I’m not sure how they still get away with it. But that’s why they use a 1099-K primarily.
And this is why you’re less likely to receive a 1099 from Uber Eats.
The minimum before a 1099-K is used is $20,000. That’s a heck of a lot higher than $600 for a 1099-Misc. Usually only the most die-hard Uber Eats couriers will get a 1099-K.
Uber does sometimes send out a 1099-Misc. Any of their incentives, referrals and such that they send out are reported using a 1099-Misc. Delivery fees and tips are reported on the 1099-K. For instance, in 2018 I delivered enough for Uber Eats that I received a 1099-Misc for the incentives but not enough to get the 1099-K for the other earnings.
Uber does provide a tax document that shows the total earnings. You can log into your account and download that document and use that as the basis for your earnings. That amount would be listed on the first income line (gross receipts not from a W-2 or 1099).
Sometimes it looks like Uber Eats reports more than what you actually earned.
Remember what I mentioned that they position this as a direct payment minus their commission. If you earn enough to get a 1099-K from Uber Eats, they will report a higher amount than what you actually received. However, on their tax report they also report that commission that you supposedly paid back to Uber Eats. That commission is something you would enter in your expense side of the schedule C, usually as a line item on line 27: Other expenses.
Gross Receipts Not From 1099-Misc or W-2
This is where you add up all the money you received that wasn’t reported on any of the 1099’s that you received.
For most of us, that is going to come one of three ways:
- Cash tips
- Money earned for a company for whom we did less than $600 of earnings and thus didn’t get a 1099
- Money earned for Uber Eats that would have been reported on a 1099-K.
Do we have to report this money?
There’s a lot of controversy about that question.
Some are going to tell you that if the IRS doesn’t know about it, you don’t need to report it. That’s especially the case with cash tips.
Is that true? The IRS states that “All cash and non-cash tips are income and are subject to Federal income taxes.” The bottom line is, any money you earn is money you are required to report. Because it hasn’t been reported elsewhere does not mean that the IRS either won’t find out about it or won’t believe that you didn’t make it.
Learn from the Auditing of tipped employees
The best warning that you can get is to pay attention to what often happens with wait staff. The IRS knows that cash tips are vastly under-reported, and they are known to target tipped employees. They can examine bank records or just look at lifestyle and make a determination that you obviously are making more than what you are reporting. I’ve heard of cases where they went back and estimated how much someone would have made based on the sales amounts and industry averages.
Here’s the thing: The IRS looks for patterns. They look for things that are outside the norm within certain industries or occupations. When things are unusual, that can trip a flag that tells them to check into things. Fortunately for us (or unfortunately, depending on how you look at it) cash tips are not as normal anymore. It’s all done through the app. But it does happen enough that reporting $0 in the other income line could be the kid of thing to get their attention.
Reporting Uber Eats income when you didn’t get a 1099K
I mentioned earlier that in 2018 I received a 1099-Misc but not the 1099-K. That means the bulk of my earnings from them were unreported. That scenario creates a temptation to not report the larger earnings.
Remember what I just said about pattern recognition. The IRS has thousands of people who work these platforms that report in this way. The way these companies work, if you received a 1099-Misc, that’s a huge indicator that you earned a lot more money from them than was on the 1099-Misc. You think the IRS doesn’t know that’s the case? If they have a 1099-Misc on record from one of those companies and don’t see any income reported in that line for non-1099 compensation, it’s real easy for that to trip a flag that says you didn’t report all your income.
A lot of us can have that angel on one shoulder saying report it, and the devil on the other saying the IRS doesn’t know about it so don’t report it. Just because they don’t have the specific information doesn’t mean they can’t or won’t dig into it and find out if the patterns don’t add up right.
Finally, you add up all three, and you have your gross income for your business.
That part is pretty simple. You now have a total of all the money that has come into your business.
Now, we go to work on the expenses. Kick back, this one could take awhile.
The Tax Information Series for Delivery Drivers (Grubhub, Postmates, Doordash, Uber Eats, etc.)
- 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?