HOW TO FILE TAXES AS A LYFT OR UBER DRIVER
Tax season is upon us yet again and what better way to kick it off then to lay out a few points to consider when filing this year. As an Uber or Lyft driver, taxes are treated a little differently than working for a traditional employer to so it is very important to take plenty of time to file them correctly. PLEASE MAKE SURE TO READ THE DISCLAIMER BELOW.
An employee working for a traditional company is only responsible for a portion of Medicare and Social Security tax, in addition to federal and state income taxes. However, because you drive your own car on your own schedule, you are viewed as a contractor, which means you owe both the employer and employee portion of Medicate and Social Security Tax (because you are both the employer and the employee in the eyes of the IRS).
As an Uber driver, you will receive 1) 1099-k and 2) 1099-MISC. The 1099-k is fairly new and sums up any earnings that were processed via electronic means such as PayPal or a credit card processing company (i.e. rides). You will also receive a 1099-MISC. This is all other income from referrals or anything not involving electronic processing.
The income listed on these forms is what you will use to fill out self-employment expenses and income on Schedule C, which lists profit or loss from business income, and Schedule SE, on which you will calculate the employment tax owed (if your net income in excess of $400). All of these forms are very simple and have step by step instructions in regards to filling them out. Also, software like TurboTax or Tax Act walk you through step by step as well.
Lyft and Uber tax forms
The difference between Uber and Lyft is that Lyft will not provide you with a 1099-K or 1099-MISC if they processed less than 200 transactions or $20,000 in payments. As discussed below, this DOES NOT mean you can skip payment. You still must fill out a Schedule C and Schedule SE by using the yearly earnings summary provided by Lyft as a reference.
Please note that most drivers do not realize that when Uber sends you an earnings statement, they also file it with the IRS, so if you do not report your earnings there is a chance this will get discovered and you may get audited by the government which at no time in history has anyone ever enjoyed.
As a contractor, you will have expenses in order to make your business run, and you can deduct these to offset some of your income. However, it is important that you keep very good records of these expenses so if the IRS ever comes back and requests proof of the expense, you can provide it (i.e. receipts for gas, car washes, maintenance, records of mileage driven, etc.).
There are two methods of deductions that will be reported on your Schedule C form 1040. 1) Standard Mileage or 2) exact expenses, but not both. The most popular option due to its simplicity is Standard Mileage, which is a deduction of $0.575 per mile as of 2015 and this includes depreciation, gas, license, tires, maintenance, etc. The other option you have is to deduct exact expenses, and below is a short list (not comprehensive) of things you are able to deduct if you choose to go this route:
1) Maintenance – Brakes, tires, inspections
3) Toll fees
4) Interest on your car loan
5) Title, Registration and License
6) Vehicle Depreciation
7) Car Payment
9) Mobile Phone expenses (if all calls and usage is work related)
10) Meter and garage parking fees
11) Roadside service membership such as AAA/Good Sam
All of these expenses must be proportionate to the use of the vehicle for business. For example, if an oil change costs $20 and you used your car 50% for work and 50% for personal use, you would only be able to deduct $10 on your tax return. As you can see below, the form is self-explanatory; you just put the amount of the deduction you would like to claim into the corresponding line. Again, if you choose to deduct certain items MAKE SURE you have the proper receipts or proof of expenses should the IRS question your deductions.