While you’re busy buzzing around town picking up your Uber or Lyft fares, don’t forget: The deadline for filing your taxes is right around the corner.
When you signed up to drive with Uber or Lyft, you became an independent contractor for the company. That means you’re self-employed. Yay!
It also means you’re responsible for your own taxes and all the paperwork that comes with it. Boo.
I’ve been working for myself (although as a writer) for a long time, so I can tell you how to file independent contractor taxes — it isn’t as bad as it sounds.
Of course, even if it was, it’s not like we have a choice, right?
So let’s get to it.
Gather Your Paperwork
In addition to hoarding pennies, I highly encourage Uber and Lyft drivers to hoard whatever paperwork you think might even possibly come in handy at tax time.
You can always toss what you don’t end up needing.
Before sitting down to do your taxes, go round up:
- Mileage logs
- Gas and car maintenance receipts
- Proof of insurance
- AAA membership documentation
- Car payment information
- Your vehicle’s license, title and registration
- Mobile phone payment documentation
- Receipts for tolls and parking
- Any additional Internal Revenue Service worksheets you may need
Track Down Your 1099s
As an Uber or Lyft driver, there are two types of 1099s you need to know about: 1099-MISC and 1099-K.
A 1099-MISC is a form companies are required to file with the IRS when it pays an independent contractor $600 or more during the tax year.
This income is not from rider fares, but instead covers stuff like driver incentives, referral programs or bonuses.
A 1099-K form reports the amount of money you received from rider fares. Lyft is very specific — if you earned at least $600 in gross receipts during 2016, you’ll get one of these.
This form reflects the total fare amount before Uber or Lyft takes out its commissions and fees, so be sure to deduct those before you calculate your total gross fares on your tax return.
You’ll find Uber’s breakdown of its commissions and fees on the Uber Tax Summary sheet you’ll receive with your 1099s.
Companies must file 1099s with the IRS by Jan. 31, so yours should already be available from Uber or Lyft now.
When you signed up to drive with Uber, you were given the choice between having your 1099s mailed to your address on file or or via electronic download. If you haven’t received yours yet, log into your driver account and check for a message from Uber for details on where to find it.
For Lyft drivers, accessing your 1099s is as easy as logging into your Driver Dashboard and printing them out
Decision Time: Standard or Itemized Deductions?
When filing your taxes as an Uber or Lyft driver, you can take a standard deduction that includes expenses associated with using your car for work — think fuel, insurance, maintenance and repairs.
Alternatively, you can itemize every expense you incurred during 2016.
Not sure which option is best for you? Bust out the calculator because it’s math time!
Begin by calculating your standard mileage for the year. If you know how many miles you drove for Uber or Lyft in 2016, the formula is easy.
The 2016 standard mileage rate when using your car for work is 54 cents per mile. (That figure went down on Jan. 1, 2017, so be sure to use the correct rate for the 2016 tax season to get the most bang for your buck.)
Next, crunch the numbers to see what happens if you itemize your individual expenses.
If you use your car “for both business and personal purposes, you may deduct only the cost of its business use,” according to the IRS.
Unless you only use your vehicle when driving with Uber or Lyft and leave it parked the rest of the time, you’ll need to figure out what counts specifically as a work expense.
This is where all that paperwork you gathered will come in handy.
The IRS allows you to itemize “gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments).” Tolls and parking expenses are a separate but allowable deduction.
In many cases, you can also write off your smartphone, maps, business cards, and even gum or candy you hand out to your passengers.
There are some exceptions, though, so check with a tax professional to see if those Altoids you give out on Friday nights qualify as a deduction.
If you decide to itemize your deductions, hang on to all the receipts and paperwork you used to make your calculations in case Uncle Sam comes calling for an audit.
Consider Getting Expert Help
Figuring out all this tax stuff isn’t easy.
A lot of people hate doing their taxes. I mean, really hate it.
There’s no shame in getting expert to help you figure out how to get your taxes done.
You might even qualify for a bigger refund than you expected.
Why? Well, in addition to vehicle expenses, independent contractors often qualify for several other deductions, including payments for health insurance premiums and home office expenses. A tax preparer can help you work it all out.
Think of it this way. You could spend hours poring over the nuances of tax law — or you could turn it over to a professional and get back out there making money from Uber or Lyft fares.
A tax preparation service like TaxAct prepares and files your federal taxes for only $37. (H&R Block charges nearly $55 to prepare a filling for self-employed workers and TurboTax is as high as $90!)
That price even includes unlimited phone support, in case you want to discuss the specifics of your situation with someone.
Don’t Wait Until the Last Minute
Whether you do your own taxes or bring in someone to help, don’t put it off.
If you owe money on your taxes and miss the filing deadline, you’ll get hit with interest and penalties that will only make the situation worse.
Your turn: Is this your first year filing taxes as an Uber or Lyft driver? #TeamStandard or #TeamItemize?
Disclosure: This post includes affiliate links. We’re letting you know because it’s what Honest Abe would do. After all, he is on our favorite coin.
Lisa McGreevy is a staff writer at The Penny Hoarder. She likes bringing you this information, but she is not a tax preparer, and this is not legal tax advice.
The post The Ultimate Guide to Filing Your Taxes If You Drive With Uber or Lyft appeared first on The Penny Hoarder.
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