There's a lot of concern that you might not be able to claim all your miles with Grubhub since they pay by the mile. After all, if Grubhub (or any other delivery app) pays by the mile, some will tell you that's a reimbursement. That could cost a lot of money.
Can I claim all of my miles when delivering for Grubhub when they pay by the mile? Yes, you can claim all those miles because that payment is NOT a reimbursement. Using miles to calculate your delivery fee is not the same thing as a reimbursement.
The confusion about claiming miles and reimbursement as an independent contractor.
Here's what it boils down to: If you are reimbursed for expenses as a contractor, you cannot also claim those expenses on your taxes. The company that is reimbursing you is claiming those expenses on their taxes. If you claim the expense, that means it's being claimed twice.
The IRS doesn't like that.
Does that mean we're screwed?
No. That's because you are not being reimbursed. There's a huge difference between being paid based on your miles and being reimbursed for your miles.
How do you know if you are being reimbursed or not?
This is where the confusion lies.
The pay summary above from Grubhub shows a breakdown of how delivery fees are broken down. Notice the “$0.67 mileage (2.93 mi),” the “$1.32 mileage (5.739 mi)” and “1.08 mileage (4.696 mi)”? Wouldn't that mean that $3.07 was a reimbursement for the 13.365 in that example?
No. Even though miles are explicitly listed as a basis for the pay, this is not a reimbursement.
If you are wondering if mileage pay is a reimbursement or not, here are three things to consider.
Grubhub would explicitly state that it is a reimbursement.
Notice that it does not call this a reimbursement. The word reimbursement is never used here. Grubhub never gives any kind of record or report stating that you have received a reimbursement.
I've never received anything, ever, from Grubhub stating I'm reimbursed for my miles. I've delivered for nearly three years as a contractor for Grubhub and I've never received anything stating that the miles were a reimbursement.
In fact, Grubhub and other gig economy delivery apps want nothing to do with the term reimbursement. Why? IRS Publication 1779 says this: “If you are not reimbursed for some or all of business expenses, you may be an independent contractor.” The IRS sees reimbursement as an indicator of whether or not there's enough financial control to state that you are an employee.
You would have to report your expenses to Grubhub or any gig company for reimbursement
IRS Publication 463 goes into detail on how reimbursements work with independent contractors. In particular, they state that “you should provide an adequate accounting of these expenses to your client.”
There is no process to report your expenses to Grubhub. If this were a reimbursement process, Grubhub would need to get those records from you so they could document the expense. They don't do that. If there's a reimbursement, there has to be a paper trail that explains that it's a reimbursement.
If the payment was reported as income, it is not a reimbursement.
This is the big one.
Think about it. The whole idea of a reimbursement is so you don't have to pay taxes on what you were given to cover expenses.
The multi-thousand dollar question to ask about the mileage pay is whether or not the money you were paid is reported as income. If it is reported as income, it is not a reimbursement.
And if it's not a reimbursement, you can fully claim your miles.
Here's what I can tell you from my experience: I've tracked everything I receive from Grubhub. I double check my 1099 forms at the end of the year to see if they line up with what I was paid.
You should do the same thing, because sometimes these gig companies get your 1099 wrong.
Every penny that Grubhub has paid me, including the miles portion of my pay, was reported on my 1099.
Which means every penny was reported as taxable income.
And that means that it is not a reimbursement.
Meaning you can claim those miles.
What if I do receive a partial reimbursement?
In the pay example above, Grubhub is using 23¢ per mile as their basis for the mileage portion of their pay model. Another example would be that under Prop 22, the payment floor would be calculated in part on 30 cents per mile driven.
Grubhub's pay is not a reimbursement. I'm quite sure that the payment under Prop 22 will not be a reimbursement either (though none of it has been implemented yet).
However, if you were truly reimbursed as an independent contractor, and the following criteria were met:
- The company you contracted with specifically stated it was a reimbursement
- There was accounting for the actual expense you were being reimbursed
- That money was NOT included in your 1099 or other tax reports
IF those criteria are met, it truly was a reimbursment, but the reimbursement was for less than the allowable 57.5 cents per mile (2020 tax year), what can you do?
You can still claim the difference. From my understanding there are two ways you could handle this:
- Claim the difference between the allowable expense and what you were reimbursed. If you drove 10,000 miles, were reimbursed $3,000, you could claim $2,750 (based on 2020 57.5¢ per mile).
- Claim the reimbursement as income, and then claim the full allowable amount.
I'm not a CPA nor do I play one on TV. But all the things I read seem to point to the second option as the best way to go. It's cleaner and less complicated. You're not having to explain the breakdown that these miles were at 57.5¢ and these were at 27.5¢. It just gets ugly if you ever got in a spot where you had to explain why the difference.
Don't give away your deductions
A lot of the information I see is partially misinformed. I see some who come from an employment perspective. As independent contractors, we're not employees. Other people understand you can't claim reimbursed expenses, but don't pay enough attention to realize that there's no reimbursement here.
You're running a business. You have to use your own vehicle, and that's expensive. Make sure you're keeping up on your expenses, tracking your miles.
And claim every mile you are allowed to claim.