What will you have to pay on tax day as a delivery driver who contracts with gig economy companies like Grubhub, Doordash, Postmates, Uber Eats or others?
I have no clue.
You might owe a lot.
You may be getting a hefty refund.
There are so many factors that impact whether you pay in a ton or get a bunch back:
Do you have other income?
Are you filing single or married?
Do you have dependents?
Do you have investments?
Are there any tax credits?
Have you paid in?
These questions barely scratch the surface.
Introducing the Delivery Driver's Tax Information Guide.
Before we go any further: Get Tax Help!
Here's the thing: This is not tax advice. I am not a tax professional. I don't even play one on tv. This is NOT meant to be tax advice or any advice to help you with your particular situation.
It is meant to help you understand how your delivery driver business works with the tax situation. I can't recommend enough that you get someone who can sit down with you and go over your own situation and help you figure out your specifics.
Understanding The Tax Impact of your Self Employment Income with Grubhub, Doordash, Postmates, Uber Eats, Instacart and other contractor based gig delivery companies.
This guide isn't meant to help you know your total taxes.
We'll touch here and there on the bigger picture of your income taxes. However the purpose here is more about understanding the self employment part of your taxes.
In particular, it's meant to be a guide to help understand the tax related things you need to know about when delivering for Grubhub, Doordash, Postmates, Uber Eats, etc.
Let me ask a question: What were your taxes last year?
Most of you will answer with “I got a refund of….” or “I had to pay in…”
That's not the same thing. There's a huge difference between what you had to pay and what you got as a refund, and what your taxes were.
My guess is, you have no clue what the actual tax amount was. You probably never even looked. Or maybe you glanced.
That's okay. I'll be honest: I'm not sure myself.
But that's how it works with taxes. We fill out all the forms or someone does it for us, and then we just pay attention to what we have to do (or what we get) at the end.
We pay even less attention when we work as an employee. The company takes money out of our paycheck and sends it in to the IRS on our behalf.
We really don't even notice it because it never came out of our pocket. In fact it never went INTO our pocket in the first place.
So then April 15 rolls around and we hope enough was taken out that we get a refund. Other than that, we often don't pay that much attention to our taxes.
And that's why we feel so unprepared when we are self employed.
As employees, we are used to having everything done for us. The boss sends in our withholding AND our Social Security/Medicare. The most we think about it is when we wonder if we should change our withholding amounts.
But now that you are a contractor for any of these gig companies, it's all on you. No one is taking taxes out for you. They just send you the money and the rest is up to you.
A lot of us are really accidental business owners. We may not have planned to actually BE a business, but here we are, being taxed like one.
That's a stark reality: There are TWO taxes involved here. Income tax and Self Employment Tax.
The thing is, you ALWAYS had two taxes involved. As an employee, you had income tax and FICA (Social Security and Medicare). Being self employed, Self Employment Tax is our version of FICA.
You probably didn't pay much attention to FICA because we didn't have to file anything. It just came out of our pay. As independent contractors, we have to take care of that part.
We'll cover more on those things later in the guide.
This guide will be broken down into individual articles. They'll look like a normal blog post on this site. The idea is to talk in detail about a particular topic.
You can follow the menu for the guide, one at a time, or just pick and choose the articles that you need help with.
This is about helping you understand how your earnings as an independent contractor, business owner and self employed individual will impact your taxes overall. It's designed to speak specifically to our situation, as gig economy couriers with companies like Instacart, Grubhub, Doordash, Uber Eats, Instacart and Postmates.
My goal is to help you understand the concepts, NOT provide advice. If you need individual advice, you should seek a tax professional.
The Topics We Will Cover
We'll organize this into three sections: Understanding income, understanding expenses, and understanding how to put that all together on your taxes.
We've got a lot of articles in this guide. That's because I wanted to be thorough enough on each topic, but not making it one horribly long read. It's meant to put it all together in bite sized chunks.
1. Understanding your income.
Here's the thing: You aren't taxed based on the money you get from Doordash, Uber Eats, Grubhub, Instacart and all the others.
You're taxed on your profit. We'll talk about what that is. Here's the crazy thing – your business expenses actually go into the income part of your tax form. How does that make sense?
Because the expenses help you determine profit, and profit is your form of income.
We'll talk about the money coming in. What earnings DO you report? How do you handle the 1099's you get from gig companies?
And we'll talk about what to do if the income reports are wrong.
2. Understanding your expenses.
Once you understand that your income is actually what's left over after your expenses, then it makes sense to understand your expenses.
Most of this is about your car. That's because for most of us in the delivery gig, car expenses are far and away THE biggest expense. If you fail to understand your car expenses, you could pay thousands more in taxes than you have to. Most other expenses have nowhere near that kind of impact.
We'll talk about what car expenses you can claim, and try to sort out the difference between claiming the standard mileage deduction and claiming actual expenses.
We'll talk about how to track your miles, which miles you can track, and even what to do if you forgot to track miles.
And then we'll talk about some of the non car expenses that are common for delivery contractors.
3. How Does your Income (profit from your delivery business) affect what you actually have to pay in taxes?
Once you've figured out your revenue, your expenses, and your profits, what do you do with that?
We'll talk about the form you use to report your profit and loss from your business (called a Schedule C)
Then we'll talk about what self employment tax is, and how income taxes work in light of your self employment income.
We'll get into some special deductions a self employed person can take on their taxes that aren't actually expenses. These deductions are part of the tax filing process.
Finally we'll get into how to save up for your taxes for the next year.
In case you didn't catch it before.
I'm not a tax pro. I just saw the need to present this information in a step by step manner to help understand how taxes work.
This is not tax advice.
This is intended to educate. To help you understand taxes, explain the concepts.
Once you understand taxes better, you can figure out where to go. If you need tax advice related to your specific situation, seek out a tax pro who understands gig economy taxes.
Let me know how this helps. Let me know your feedback. Are there questions that remain unanswered? Is this explaining things well or muddying the picture even worse?
There's a lot of misinformation and disinformation out there about taxes. There's bad advice and incorrect data all over. I want to provide something that helps. Hearing from you will help me refine and hone this. Thank you in advance for your feedback!
This card below lists out the articles in this series, or you can check the list in the sidebar.
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?