It's the end of January. You are starting to get your 1099 forms from Grubhub, Doordash, Postmates, and Uber Eats.
Crap. It's tax time, isn't it?
So let's talk about 1099's today.
Before I go any further, let me make this clear. This is not meant to be a talk about taxes. It would be too much to try to cover that AND the 1099 form, so we'll just settle on talking about the 1099's.
Next week, I have a CPA lined up who runs a company preparing taxes, he teaches accounting at a local university and he does a little bit of delivery on the side. We'll dig more into taxes with next week's episode.
What IS a 1099?
Some would say this is an independent contractor's version of a W-2 form that employees get. Not really. It really doesn't work the same was as a W2, I'll touch on that in a moment.
The 1099 has a dual purpose, to keep the paying business AND the receiving business accountable. It serves as a check and balance to keep both sides of the transaction honest.
You're already familiar with the importance of reporting your expenses so your taxes aren't too high, right?
I think much of the reason for the 1099 is that if a business is saying we paid out this much to contractors, the IRS is saying, okay, back it up. WHO did you pay? And so the IRS says tell us everyone you paid $600 or more to. And that's what the 1099 is mostly about.
But now that Doordash or Grubhub or anyone that you contract for has sent in this report, and it has your Social on it… the IRS knows you made that money. If you aren't reporting it, they know you aren't. And that can be a problem.
1099's, Schedule C's and W-2's.
So I mentioned that the 1099 is NOT our version of a W-2 that an employee gets. Yes, it's a report of money that was paid out by an employer or a business that hired contractors. But it's very different.
On a W2, you have a number that is considered your earnings. This is how much you paid and THAT number is your taxable income. It's that one number that gets added up with other W2's if you have them to report your employment earnings.
The 1099 doesn't work the same way. Your 1099 is a small piece of the puzzle.
When you are self employed, you are pretty much responsible for creating your own self-employed version of a W-2. THAT version that you are creating is the Schedule C.
There, you add up all your 1099 income, AND you add income that wasn't reported on a 1099. Then you subtract your expenses – so that's where you put your miles. And it's that total – your profit, your income minus expenses – at the bottom line on that Schedule C, that you put on your taxes.
That's good news. Because if you had to pay taxes directly off your 1099? For most of us, that wouldn't be a good thing.
What about a 1099-K?
Sometimes in the Gig economy, you'll receive a 1099-K instead. This is more likely to happen with Uber and Lyft, or from Uber Eats. We'll talk about Uber Eats a bit more soon. You have to earn more to get these than you do to get the regular 1099-Misc.
The 1099-K works the same way – you have one amount that you enter onto your schedule C. It works a little differently – the main idea of the 1099-K was meant for merchants who sold goods or sevices. For example, say you flipped merchandise on eBay.
A lot of people were doing this under the table and the IRS caught on eventually. So what they said is if you receive a certain amount of money from credit card or payment centers, they have to report that income.
Gig companies that use the 1099-K esentially do it to create this image that they are not actually hiring drivers (it's all about AB5 type stuff). Instead, they are connecting drivers and passengers, and so what you are receiving is really just a payment from the customer. I
t's a sham really, a front to allow them to continue justifying their independent contractor classification. But that's getting off topic.
What if I Don't get a 1099?
There can be several reasons it hasn't happened.
The first is, it hasn't been sent out yet. Companies are required to send them out by the 31st of January.
That means they can send them out the last possible minute that they can get them in the mail and still get a postmark of January 31. Or, if delivering them electronically, they don't need to email them until the very last moment.
If yours was sent by snail mail, you could be looking at 6 to 7 days into February before you get your copy.
If you did not earn enough money, you won't get a 1099. Companies do not have to send you a 1099 unless you received $600 or more in payments from them.
If the company reports via a 1099-K, the limits are much higher. A company only has to file if there are more than 200 transactions AND more than $20,000. If it's less on either of those two, you likely won't receive one.
If you're sure you should be getting a 1099, don't just assume one was never sent out. You want to verify that the companies you work with have the correct contact information.
Check your spam folders in case they emailed it.
There could have been an error on the address, or it could have been lost in the mail.
If after a week or so into February you haven't received one, be sure to contact the company and find out if one was sent. You don't want to make the mistake of filing without knowing if they reported income or how much they reported.
What if my 1099 information is wrong?
The first thing you want to do is make sure it really is.
How good are your records? At this point you want to go deep to find out what really should have been reported. Make sure you captured everything.
I will tell you, do NOT rely on your earnings report in the app. That report may not be accurate.
Reports might report only the delivery fees and tips you received for the week but might not include tips that were added later or any adjustments provided by the delivery company.
In Doordash's case, for whatever reason they only keep about three to six months full data on their app.
The best option is to go through your bank records and look for the deposits. Make sure you capture them all.
Make sure you have checked all places that deposits might have happened. If you use the instant pay feature you want to make sure you're capturing whatever deposits went through that as well as your direct deposit.
At that point, if the 1099 is definitely wrong, you MUST request a correction. Contact the appropriate support and request that they sent you a corrected 1099. Do NOT file your taxes until you have confirmation that the 1099 has been corrected (ESPECIALLY if the 1099 over-stated the amount that you earned).
Uber Eats and 1099-Misc's and 1099-K's.
With Uber Eats you might receive a 1099-MISC AND a 1099-K. Or you might receive neither one.
Uber Eats is treating their 1099's like how rideshare does it. By using a 1099-K they are claiming that what you receive as a payment is just being passed on from the customer, minus a portion they take.
That would make sense if that's what they did, but everything that I've seen is that the money that the customer pays and the money we receive have nothing to do with one another.
So here's how it breaks down with Uber Eats. The delivery fees and the customer tip are reported on the 1099-K. If you had fewer than 200 deliveries or less than $20,000 in earnings from those items, you will not receive a 1099K.
Extra incentives from Uber Eats deliveries, such as quests or referral bonuses are reported on the 1099-Misc. You need to have $600 in those to receive a 1099-Misc.
One piece of information Uber does provide is a tax summary. If you log into Uber as a Driver, you can find the information under Tax Information.
On that summary they provide gross earnings (which is the gross trip earnings that go on the 1099K and the additional earnings that go on the 1099-Misc), minus the fees (which is basically the fake Uber commission) and your total earnings.
Even if you don't receive a 1099-K or 1099-Misc, it's wise to be aware that this document is out there.
Doordash and their Annual 1099 Blunders
Folks, I'm not sure what to say about Doordash. As a driver you are probably all too aware of how the app screws up all the time, right?
Ratings get screwed up… I'm just so amazed at how a massive company like this, a company who says we are not a delivery company, we are a technology company, how they can be so bad at technology on such a scale.
This is the second year that I've witnessed this issue and some long time drivers have said it's been an issue for three or four years or more. Drivers all over are reporting that their 1099's are wrong.
And here's the funny thing, every single report I've heard is that they way over-reported. Now maybe no one's going to report if the 1099 is too low, to be fair. But it's just crazy that it's that bad and doesn't get fixed.
Why is Doordash this bad???
I can't tell if it's incompetence or if it's intentional.
From a technology standpoint and from how they report their data, incompetence is something that isn't out of the question.
I mean, here's a problem with Doordash. You can't access your delivery records beyond maybe about 3 months. You cannot pull up a history ANYWHERE other than that 3 months of delivery records.
I don't know why they pull those records after awhile. Is their tech on their apps THAT bad and that outdated that they cannot store more than a couple months of data or something? I mean, this was a problem back when memory cost a lot of money, but that was a long, long, long time ago.
But the thing is, with everyone else, there's a record. It's accessible to drivers. The data is there, and that makes it easy as individuals to pull it down. My guess would be that makes it easier for the company to pull that information.
I have no idea why Doordash refuses to keep the data available for drivers. It's kind of like one less area of transparency. Again, I don't know if that's something that something in their programming doesn't allow that capability?
But the thing is, I think that it could be that at the end of the year, instead of just pulling the data that's already there like everyone else does, they have to go back through all their information and from all the different sources, and piece it together. I think there are a lot of possibilities of them getting it just wrong.
Is Doordash outgrowing their technology?
Years ago I sold phone systems by NEC. They had a phone system for small businesses called the Electra Elite. It was a good little system, it was solid – it just worked, you know? But over the years they kept adding feature and things and… the overall infrastructure just didn't have room for all those new things. You want me to add Voice over IP? Where we gonna do that??? They basically outgrew the operating system, and ended up buying out another brand and using THEIR software to operate the system.
It wasn't that long ago Doordash was a kind of side player, they were fighting Postmates to stay out of the basement. I really wonder if they just didn't outgrow the infrastructure of their app. And maybe that's the issue.
Or is the problem something worse than incompetency.
You would think that they would learn after the first time. Or the second time, or however many times.
When they haven't learned, you wonder, is it something worse?
Could there be something intentional happening?
I admit I'm jaded about Doordash: I do believe they are by far the LEAST trustworthy of all the delivery apps. However, I DON'T believe they are trying to intentionally screw drivers over with this. That's not what I mean by intentionally….
Excuse me as I put on my tin foil hat…
This might venture a bit into tin foil hat territory here. But I gotta wonder. Just the regularity of it happening, just the fact it's always OVER stating, and you can't help but wonder if it's more than incompetence here?
I mentioned this earlier about why the 1099 exists – I think the primary purpose is to place a check on companies overstating what they are paying out when doing their taxes.
In the corporate world, it happens all the time, things get over-stated or understated. You know, when you play these kind of games with what information you make available, you have to think there's a reason.
Somewhere along the line you have to report that you paid out so much money to contractors. But when you do that, you have to fill out the 1099's, right?
I look at how the company operates and it's shady as all get out. Some say Shady AF. I don't know, but when stuff like this happens every year, and it's dramatically higher for a lot of contractors, that raises a red flag.
Is someone fudging numbers for investors? Is someone pocketing money and figuring it out?
And Somewhere between the end of January and February or March when you actually send in the corrected reports, you have time to find somewhere else to shift it? I know, probably crazy talk…. but something about that just stinks. Kinda like a rat, you know?
So what do you do with your 1099 from Grubhub, Doordash, Postmates, Uber Eats and other gigs?
If you're asking that question, the best answer I can give you is, get a tax pro.
I'm not sure I'd call those places with dancing statues or sign twirlers the kind of place you want to go. A lot of these places, their tax preparers are trained to use the software, that's it.
You want some expertise. Find someone who knows self employment taxes and have them help you.
Seriously a good tax person will probably save you more than you have to pay. One of the best investments you can make.
Reporting your 1099 income on your Schedule C.
I mentioned this but it's worth repeating. Don't panic – your taxes are not based on your 1099.
The 1099 does not reflect your taxable income. It reflects your gross business income. As a business, you could say this is your sales.
So you add your 1099 income to other income for your business and total that up.
Then you add up your expenses.
It's the difference between the two that becomes the line item that moves over to your taxes. If your 1099's add up to $30,000, you don't owe taxes on $30,000. Say you had $14,000 worth of mileage deductions and other expenses – you put all that in your Schedule C as well. It's the difference at the bottom, the amount left over AFTER expenses, in this case the $14,000, that is your taxable income. THAT is the line that you move over.
What about income that wasn't enough for a 1099?
The IRS is going to tell you that's still taxable. How much do you want to argue with them?
Here's the thing about that: That money is kind of like cash tips. It's money that wasn't reported to the IRS.
At that point, you're the one to decide what to do with that information. Some will tell you that if the IRS doesn't know about it, you don't have to pay it.
I will tell you to be careful with that. If the IRS doesn't know yet, that doesn't mean they can't know about it later.
The IRS looks for patterns. When things seem out of the ordinary for a particular type of income or a particular type of business, that gets the attention of their computers. It's the computers that spit out returns that auditors might want to look into.
The IRS knows that certain professions tend to get a lot of high tips. If you are a waiter or waitress and there's no additional income on top of your W-2, that's can be a sign that something's missing.
Say you deliver for Uber Eats. If you get a 1099-Misc for the incentives, everyone knows you made a LOT more than that in fees and tips. It's the same kind of thing as the wait staff, it's a pattern thing that can cause them to want to look a little more into it.
And finally, you start getting your information together.
You have your income. You want to make sure you have all the information on your expenses. Your miles. Your other things. That's for another time – we'll dig a little more into the things you can claim next week.
Do you file now? If I'm expecting a refund, I'm filing that puppy as quick as I can. If I owe, I'm dropping that thing off at the very last minute I can at the post office on April 15.
That's a whole nother thing. I would recommend you start looking into getting a feel for what you're going to owe, maybe do a dry run now that you have a lot of your info together. That way you at least have an idea how much you have to save in the next 2 and a half months.
And that's the thing. Late January always puts a scare into drivers because they may have been forgetting or ignoring the tax thing. Now it's real. Now it's looming.
But… you have time. It's good this is happening in January because you have time before you actually have to pay in (IF you have to pay).
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?