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How Much Should I Save for Taxes As a 1099 Delivery Driver (2022)?

As an independent contractor, you should set aside enough to cover the 15.3% self-employment tax and at minimum 10% federal income tax. There are a lot more moving pieces than just that, so we'll look at five steps you can take to stay out of tax trouble by saving up now for your taxes.

What happens if you don't save? If you've been particularly profitable with your delivery contracting, you could be in for a rude awakening come tax time. You're on your own for taking out your own taxes, and none of these delivery companies take them out for you.

Whether you're delivering for the bigger food delivery services like Doordash, Uber Eats, Grubhub, shopping for and delivering groceries for Instacart or Shipt, doing package delivery for Curri, Veho, Spark, Roadie or working with a number of other gig economy companies, it all works pretty much the same.

Most of these delivery gigs pay weekly. Some just pay you as you go. The best rule of thumb is to set aside money at least once a week for tax savings. Don't touch it for anything else.

Here are the five things you can do to make sure you saved enough for taxes.

  1. Understand what your taxes are based on.
  2. Estimate your profits
  3. Decide what to save
  4. Save it
  5. Send it in.

After discussing those steps, I'll walk through my weekly routine for setting aside taxes for my 1099 delivery work.

The Delivery Driver's Tax Information Series: The information contained in this information series is for educational and informational purposes only. This information is not intended to be and should not be considered to be legal, tax, or any other professional advice. Information is provided as a best effort to research useful information on this topic but makes no representations as to the accuracy or completeness of information provided. Suggestions and ideas presented are based on my experiences and opinions. You should seek your own professional assistance to help with your unique tax and financial situation and needs.
The Delivery Driver's Tax Information Series Disclaimer

About this article

This article focuses on saving for 1099 federal taxes as a delivery driver in the gig economy. Most of this applies to any other 1099 tax savings as well.

This is not tax advice. The purpose of this article, as stated in the graphic above, is for educational and informational purposes only. We want to help you understand how things work so you can make informed decisions. For specific tax advice related to your own financial situation and needs you should seek out your own tax professional.

Finally, this is written about setting aside money for 1099 taxes as it relates to tax laws in the United States. Tax laws are different in different countries. Keep in mind, it's impossible to get into all the different state and local taxes while keeping the length of this post somewhat reasonable. You should understand your state taxes and what additional you should save for them.

Step 1: Understand what your taxes are based on.

Knowledge is power sign relating especially to independent contractor taxes
You don't need to be a tax expert but it helps to have a basic understanding of how taxes work.

It would be really easy to dive down a rabbit hole when talking about gig economy taxes. There are so many things involved. If I tried to cover it all, either it would be an incredibly huge article and you'd get lost in it, or it wouldn't cover the important details where you need them.

That's why I put together a guide, breaking it all down into individual articles that go into precise detail. That's why we created this tax guide for delivery drivers in the gig economy.

The first place to begin is to get an idea of the basics of how taxes work. If you have time, this sketch board video walks through the basics of independent contractor taxes.

As an independent contractor, you're a self-employed individual. Technically you're filing taxes as a sole proprietorship (unless you've incorporated).

Here's how it works is in three simple statements. Each statement is linked to a part of our tax guide that goes into more detail than we have room to cover here.

  1. Your taxes are based on profits, not on what you are paid by gig companies
  2. You'll pay income tax on your profits – these can vary a lot.
  3. Included in your taxes is a 15.3% self-employment tax, charged on every dollar of profit.

Once you have a grasp on that, it's easier to get an idea what to save. You can go into more depth with the video and other articles, but even a basic overview will help.

a. Independent contractor taxes are based on profit, not earnings.

If you received $20,000 from your 1099 delivery work this year, you aren't taxed on the total earnings of $20,000. Unless of course you fail to keep track of your expenses.

You will fill out a Schedule C on your taxes to show your earnings for your self employment business. On that, you will list your earnings and your expenses and come up with your net profit.

Then you subtract the expenses from the income. The money left over is the basis for your taxes. If you had $20,000 in earnings, and $10,000 in expenses, your profit is $10,000. The $10,000 is the taxable income, not the whole $20,000

This is why you MUST track your miles driven, and your expenses. To help with that, you may want to look at some of the tracking apps available. Two free ones are Hurdlr and Stride. We reviewed the Hurdlr app here and then reviewed the Stride Tax app here.

b. Income tax starts at 10% of your profits.

There are too many moving pieces to get into here. In reality, income tax doesn't start until your taxable income (profits plus whatever other income you or your partner made) exceeds your personal tax deductions.

The graphic below illustrates how tax brackets work for the 2022 tax year. You can learn more with the 1040 instructions found here on the IRS website.

Infographic of 2022 tax brackets stating that taxable income for 1099 independent contractor work is profit, and profit added to other income determines the tax bracket.
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Click on the text box below to copy the code. Please include attribution to EntreCourier.com

The income tax brackets aren't exactly simple when you start making more money. Additional income, your filing status, dependents, tax credits, all that can make your head spin.

Which is why I say this often: you really should get a tax pro.

It's also going to matter whether your 1099 income is the bulk of your earnings, or is it just a side hustle on top of other income?

That's why the flat rate estimates that you find in a lot of articles aren't helpful. Many base it on your gross income, which has you taking out far more than you need. If your other personal income or your 1099 business income is substantial, it could be less.

You want to make sure you're saving enough to cover whatever percentage equals your tax bracket.

Even more important, make sure you have a tax pro who can walk you through all this craziness.

c. The Self-Employment tax rate is 15.3% on every dollar of profit.

Income tax is goofy and varies pretty wildly.

Self-Employment taxes are comparatively easy. What did your business profit? Pay Uncle Sam 15.3% of that.

Think about Social Security and Medicare taxes – the FICA taxes on a paystub. Ever notice those are taken out of even the smallest paychecks? They're charged on every dollar earned.

That's what your self employment tax is. It's your version of Social Security and Medicare. We just never think about that because as a W-2 employee you never have to file those taxes.

The major difference is since the money's not withheld from our pay as contractors, we do have to pay it. You can't rely on deductions and exemptions here (other than your business expenses). You pay that on every dollar of profit.

Step 2: Figure out Your Profit Each Week

Picture of old calculators to use figuring out your profit for taxes
Do the math. What was left over after your expenses?

How much did your business earn?

What did you spend?

How much was left over? That's your profit, the total taxable income from your business.

It's a little more involved than that. Part of what you ‘spent' is the part that you can claim for your vehicle expenses. For the 2020 tax year, you can claim 57.5¢ of car expense for every mile you drive for business.

Here's the thing: I don't personally sit down and do book keeping every week. I just do a very basic calculation.

Earnings minus 58.5 cents per mile (2022 tax year).

Okay, the IRS just made the mileage allowance more complicated for 2022. It's 58.5 cents per mile from January through June, and 62.5 cents per mile July through August.

While I have other expenses, they pale in comparison to the mileage deduction. For tax savings purposes, I only figure in the car expenses.

If you're in another line of 1099 work with more substantial expenses, you may want to add those in.

If I made $500 and drove 400 miles, I take $500 minus (400 x 58.5¢). In other words, I multiply my miles times the mile rate. 400 miles at 57.5¢ each is $234.

$500 minus $234.

I pay taxes on $266.

Keep it simple. Otherwise you'll psych yourself out of doing anything at all.

Step 3: Figure out how much to save.

Once you know your taxable profit for the week (or month or quarter, depending on how you decide to do things) you can start figuring out what to save.

In the example I gave above, $500 earnings and 404 miles, that came out to $266 in taxable profit.

Now you can do one of two things:

  • Calculate a percentage of your profit.
  • Use the tax calculator on a third party app like Hurdlr or Quickbooks Self Employed to calculate your taxes for you (affiliate links).

Here's the thing: Don't stress too much. You don't have to get this perfect. Your main thing is you want to have enough money saved to be in the ballpark of your tax liability.

Personally, I do the first one. I calculate 25% of my profit for the week. 15% covers self-employment tax and the 10% covers income tax. While overall I earn above the 10% tax bracket, 1099 work is my primary source of income, so 10% works quite well for me. It's always left a surplus in my situation.

In the example above with $266 in profits, 25% of that is $66.50

If you have a lot of additional earnings, you might go as high as 30%. This is where a tax pro could help a lot.

I've been really impressed by how Hurdlr calculates taxes. You set up a tax profile, tell it about your filing status, whether you have other income, etc. It will take all of that and figure out the percent for you.

Like in Step 2: I recommend simplicity. Don't overthink it. Don't make it so involved that you won't do it. That's why I like the flat 25%.

Step 4: Save it.

Don't touch a penny until you've pulled money out for your taxes.

I really discourage using instant cash out or instant pay for this reason: That money isn't yours yet. It's your business's. Instead, get your money in, take care of your business (literally and figuratively) and then you can give yourself a paycheck.

Get into a weekly habit of setting aside money for your taxes BEFORE you touch a penny of it for yourself.
Create a weekly habit of setting aside money for your taxes BEFORE you touch a penny of it for yourself.

Now, get a different bank account. Don't attach it to your checking. It's too tempting to spend it if it stays in checking.

Put that money where you won't touch it for anything other than taxes.

And don't touch that money for anything else.

Step 5: Send it In.

How much money did you save? Each quarter, send it in to the IRS.

Some make this confusing by calling it quarterly taxes. This is not a different tax process. All that's happening here is you're pre-paying your taxes with quarterly payments.

Many online banks are starting to cater to small business owners and self-employed independent contractors. Some are setting up accounts that will automatically send the money in to the IRS for you.

This is you doing your own withholding for your employee, who happens to be you.

This is the best way to protect yourself. One, it protects you from spending the money. Two, it protects you from penalties and interest.

If you have to pay in more than $1,000 on tax day, penalties and interest can be added. If you're sending in money along the way, you avoid that problem.

Check out the link I put in that first line in this section. It goes into more detail, but the process is pretty simple. You fill out a form 1040-ES which is very simple. It boils down to “who are you and how much are you sending us?”

Again, don't stress. Just send it in. Do that and you won't have any major surprises come April 15.

There's a worksheet that the IRS gives you. It'll make your head spin. You don't have to do the worksheet. All it is is something to help you figure out how much to send in.

This takes me back to what I said earlier. Don't stress. Don't worry about being exact. Exact isn't possible until you've figured out your taxes for the year.

And don't make it too complicated. Complicated will make it easier to just give up. Don't do that.

To sum things up, here's what I do:

Understand: THIS IS NOT ADVICE. I'm not telling you what to save. If you want someone to tell you, either get a tax pro or at least use Hurdlr. This is my method, meant to illustrate one way to do things.

Each week:

I follow steps 2 through 4.

I do a quick profit calculation. Multiply my miles times 57.5 cents. Subtract that from my earnings.

I figure out 25% of that profit.

When all my payments come in from Doordash, Uber Eats, Grubhub etc., I have those sent to my business bank account. I don't touch a penny until I've taken out tax money, car expense money, and some paid time off money.

I put my tax money into a different bank account where I won't touch it.

Only after I've done all that will I transfer the rest to my bank account as my ‘paycheck.'

Each Quarter for the first 3 quarters:

The due date for each quarter is April 15, June 15 and September 15 (no, those are not all 3 months from one another. It's just a weird IRS thing) I just send in everything that I've saved.

I fill out a 1040-ES where I tell them who I am and how much I'm sending in. And then I send it in.

On January 15:

This one is a bit different because is the last quarterly filing.

I do a quick run at the end of the year to estimate what I think my taxes will be. It won't be precise because I won't have all the documents in, but I can get a ballpark.

Now I compare it to what I've sent in and what my wife's withholdings were. How am I sitting? What's the difference between those payments and what I think the taxes will be?

It's that difference that I'll send in. I'll keep the rest in my tax savings account, just in case.

And here's the thing: If it's close, I'll overestimate what I think I'll have to pay. It just makes it more accurate that way.

Why don't I just send the whole savings in on January 15? Nothing says you can't. I'd just rather have it in my bank. Why give the IRS an interest free loan?

This isn't the only way to figure your tax savings.

There are probably a lot of better and more accurate methods.

The IRS has their worksheets. You can always go by those, if you like to torture yourself.

I love that Quickbooks Self Employed and Hurdlr will calculate it for you. These are affiliate links. These are the two who do it the best that I know of.

The most important thing here is, save enough money so that when it's time for your annual tax return come tax season, you're not hit with penalties and interest for underpaying. And of course, so you don't have to scramble trying to figure out how you're going to pay off a big tax burden.

In the end, as a small business owner you're always better off to over save than not save enough. The worst case scenario is that you get a refund. That's better than scrambling in the end figuring out how you're paying this massive tax bill.

Stay on top of tax savings from day one. You'll make life a lot easier.

The Delivery Driver's Tax Information Series (Grubhub, Doordash, Postmates, Uber Eats, Instacart)

The Delivery Driver's Tax Information Series is a series of articles designed to help you understand how taxes work for you as an independent contractor with gig economy delivery apps like Doordash, Uber Eats, Grubhub, Instacart, and Postmates. Below are some of the articles

Tax Guide: Understanding Your Income

The following three articles help you understand what your real income is as an independent contractor.

Tax Guide: Understanding Your Expenses

The following eight articles help you understand the expenses you can claim on your Schedule C. Most of these are about your car, your biggest expense.

Filling Out Your Tax Forms

Once you understand your income and expenses, what do you do with them? Where does all this information go when you start filling out your taxes?

Could this help someone else? Please share it.

About the Author

Ron Walter made the move from business manager at a non-profit to full time gig economy delivery in 2018 to take advantage of the flexibility of self-employment. He applied his thirty years experience managing and owning small businesses to treat his independent contractor role as the business it is.

Realizing his experience could help other drivers, he founded EntreCourier.com to encourage delivery drivers to be the boss of their own gig economy business.

Ron has been quoted in several national outlets including Business Insider, the New York Times, CNN and Market Watch.

You can read more about Ron's story,, background, and why he believes making the switch from a career as a business manager to delivering as an independent contractor was the best decision he could have made.

red button labeled read Ron's story.