- 1 Uber Tax Guide
- 1.1 Tax preparation software packages
- 1.2 Understanding your Uber income tax documents
- 1.3 Form 1099-k explained
- 1.4 Form 1099-misc explained
- 1.5 Uber’s 1099-k and 1099-misc tax summary
- 1.6 Reporting your income on Schedule-C
- 1.7 Deductions and tax credits
- 1.8 Car and truck expenses: standard mileage vs. actual expenses
- 1.9 Personal vs. business use expenses
- 1.10 Cell phone related expenses
- 1.11 Personal expenses used for business
- 1.12 Other deductable expenses
- 1.13 Environmentally friendly vehicle credits
- 2 Paying your taxes
- 3 Tracking your expenses
- 4 Uber Tax Checklist
- 5 FAQ
- 5.1 Do I have to report my income on my tax return?
- 5.2 What tax documents will Uber send me and when?
- 5.3 How long do I need to wait to receive my 1099?
- 5.4 Can I file my tax return before I receive my 1099 from Uber?
- 5.5 Will I need to file a separate Schedule-C for each 1099-K and 1099-MISC?
- 5.6 What if Uber didn’t send me a 1099?
- 5.7 Do I need to send the 1099s to the IRS with my taxes?
- 5.8 What mileage can I write off?
- 5.9 Can you deduct miles when there are no passengers in your car?
- 5.10 Am I considered a business owner?
- 5.11 Should I form an LLC?
- 5.12 Should I pay my taxes with TurboTax?
- 6 Uber Tax Guide Author
Uber Tax Guide
A free how-to guide for Lyft and Uber drivers written by a professional accountant/tax preparer.
When you drive for Uber, you are regarded as an independent contractor, not an employee. This means that at the end of the year, you will receive a 1099 form rather than the typical W-2 you may be used to getting.
As an independent contract, you are considered by the IRS as a self-employed individual operating your own business. The IRS refers to this as conducting business as a sole proprietorship. Additionally, all driving services income you earn, whether through Uber or not, also fall under this same business.
Independent contractors report their income and expenses using the IRS form Schedule C. On this form, you calculate your net profit or self-employment income.
Because you are not technically employed by Uber, Uber does not withhold social security and medicare taxes or federal income taxes from your earnings like a traditional job where you get a W-2. Because of this, you are responsible for paying your income tax as well as your self- employment tax. Self-employment tax is the same as social security tax + medicare tax.
You definitely want to pay your Uber taxes in installments throughout the year to prevent being surprised with a huge tax payment when you file your taxes.
Although being self-employed is a bit more complicated, there are also certain benefits involved. The most common advantage is that you don’t pay taxes on the income reported on your 1099. Rather, you get to reduce this income by business-related expenses. If you are thorough and keep good track of your expenses, they could add up to a sizable deduction.
Another benefit is the self- employed health insurance deduction that allows you to deduct medical and dental insurance and qualified long-term care insurance for yourself, your spouse, and your dependents whether it is under a business name or your individual name. This includes the new Obamacare insurance plans.
Lastly, there is a tax credit available if you buy a qualified energy efficient vehicle.
I’ll explain all these things in more detail, but it is a lot of information to take in. My best suggestion is to hire a tax preparer that has a lot of experience preparing taxes for self-employed individuals.
Most important; however, is to make sure you are paying your taxes during the year. Estimating your taxes and making a tax payment will be explained later. But don’t wait until you file your return. You may get an unexpected and unpleasant surprise.
Tax preparation software packages
There are a few tax preparation software packages available to prepare your tax return, such H&R Block at Home, Tax Slayer or TaxACT and TurboTax.
TurboTax is one of the most common ones in the US and is designed to guide users through their tax return step by step without any specific prior knowledge or experience.
It is available for both state and federal income tax returns and offers users an additional feature for their self-prepared returns called ‘Audit Defense’ from TaxResources, Inc.
Understanding your Uber income tax documents
Uber is required to supply all their drivers with tax documents by February 1, 2016. You should always wait until this day to file your taxes.
Which tax documents you receive depends on how much income you made during the year. You will receive a 1099-MISC if you made over $600. You will receive a 1099-K if you earnings exceed $20,000 and 200 transactions.
If you made less than $600, you may not receive any tax document. Don’t take this as a reason to not report your income. You are required to report ALL of your income whether you received a 1099 or not.
Form 1099-k explained
Form 1099-misc explained
Uber’s 1099-k and 1099-misc tax summary
Reporting your income on Schedule-C
You’ll record your earnings and expenses on Schedule C to determine your net profit. You then use this Net Profit on line 31 of Schedule C to calculate your self-employment taxes on Schedule SE.
Deductions and tax credits
The IRS specifies that deductions must be ‘ordinary and necessary’ expenses. In other words, they should be reasonable and used while you are working for Uber. They have to be bought during the tax year AND you have to intend to use them in your driving business.
There are a lot of grey areas in the IRS code, and more so because of the newness of ridesharing. Unless you love tax research and are pretty tax savvy, I definitely recommend going to a tax professional or at least investing in a tax preparation program for self-employed individuals using Schedule C.
Car and truck expenses: standard mileage vs. actual expenses
The biggest deduction you will have is your car expenses. These are recorded on line 9 of Schedule C.
There are 2 methods for deducting auto expenses. These 2 methods are referred to as Standard Mileage and Actual Expenses. It is best to calculate your deduction using both methods and use the one that gives you the biggest amount.
In most cases, this method usually gets you the highest deduction and is definitely the easiest. It is calculated by multiplying the total business miles by a standard rate (determined by the IRS each year) then adding parking fees and tolls to that amount. For the 2015 tax year, that rate is 57.5 cents a mile.
- You drove 5,000 miles and paid $200 in parking and tolls.
- Your expense equals $3,075 which is 5,000 X .575 = 2,875 + 200 = 3,075.
Make sure not to just use the miles Uber provides you with. This only includes the miles driven with passengers in your car. You can deduct all the miles driven while you are working for Uber like driving around waiting for ride requests, driving to a passenger, driving home after dropping off a passenger, and the driving you may do before a ride is canceled.
Since Uber doesn’t track the mileage for these extra commutes, you’ll be responsible for keeping records on this mileage. Probably the best way to figure this out is to start recording miles as soon as you turn on your app and are ready to start working.
Actual car expenses
Actual car expenses include gas, oil, licenses, tolls, insurance, parking fees, garage rent, registration fees, repairs, and tires. You can also deduct depreciation of your vehicle and lease payments. If you made major repairs to your vehicle in order to comply with Uber’s guidelines, this method may be more favorable.
As with all expenses however, you can only deduct the percentage used for business. In order to arrive at that amount, you divide your business miles by your total miles.
You basically need to keep track of your miles for either method you use. So multiply those business miles by the IRS standard rate (currently 57.5 for 2015) and add parking fees and tolls. Then, use the larger amount on your tax return.
Personal vs. business use expenses
Uber drivers are going to have a lot of expenses that are used personally as well as work related. You can pretty much gauge when you are working for Uber and when you’re not. The following is some expenses that could be considered personal so you want to make sure to keep good records of when they are used for work.
The cost of a new phone, your monthly service bills, and a cell phone mount are some of the things you can deduct. Keep a record of the minutes they are used for business. Divide this number by your total minutes to arrive at the business percentage. Then multiply the total cost by this percentage.
If you have a phone that is totally dedicated to your Uber business, you can deduct 100% of all the costs.
Personal expenses used for business
Some examples would be:
- Car washes
- USB chargers
- A mobile router such as a MiFi
- Music apps like Spotify
- Electronic toll transponder
- Floor mats
- Tire inflator and pressure gauge
- Universal lug wrench
- Spare tire
- Flat kit
- Car tool kit
- Jumper cables
- Portable battery jump pack
- AAA membership
- Office supplies (paper, pens, etc.)
- Emesis bags (or vomit bags)
- Ice scraper
- Snow brush
For safety reasons, you may have purchased a seat belt cutter or safety hammer in case of an accident.
If you already had these items, you cannot deduct their cost. However, if you bought them for the purpose of using them while you are driving passengers, you could deduct a portion or possibly the entire cost. Some of these are grey areas. Keep good records, and it shouldn’t be a problem.
Other deductable expenses
Some expenses you could deduct in full are ones that are specifically for use by the passengers. Examples of these would be:
- Snacks and refreshments
- Extra USB chargers
- Power cables
- Mobile routers for internet connection.
If you open a business bank account or credit card, the fees and interest are deductible.
Any tax advice and tax prep fees related to the business can be deducted as well as the purchase of tax software.
Also deductible are legal fees related to starting or running your business.
Some others include:
- Car inspection fees if required by Uber
- Additional insurance (such as liability insurance)
- Paypal fees
- Dash cam (only if it is legal in your area).
Environmentally friendly vehicle credits
There are tax incentives associated with purchasing certain electric and hybrid vehicles. Form 3800 and Form 8936 are used to take the Qualified Plug-In Electric Motor Vehicle Credit, but you should probably speak with a tax professional to get the maximum credit available.
You can read about the different credits and get more information at:
Paying your taxes
If you are self-employed and expect to owe at least $1000 in tax from your ridesharing business, you are required to make estimated tax payments to the IRS in 4 quarterly installments. The IRS imposes modest interest penalties if you don’t pay enough estimated tax so make sure to put this high on your priority list.
There are 2 ways to avoid tax penalties. You can either:
There are 2 ways to avoid tax penalties. You can either:
- Pay 100% of the last year’s tax or
- Pay 90% of the tax you will owe for the current year.
* If, in 2015, you didn’t make estimated payments or have a sufficient amount of tax withheld on a W-2 or your spouse’s W-2 and you estimate owing more than $1,000 on your 2015 return, you will most likely have penalties. Make an estimated payment for the full tax owed right away (before filing your return) to stop them from accruing.
Figuring your estimated tax payments
As was said in the previous section, you can avoid tax penalties by paying 100% of the prior year’s tax. This is the best way to go if your income is fairly the same as last year.
The first thing to do is find out what your total tax was last year. If you are looking at your 2014 tax returns, this would be the amount on line 63 of Form 1040. If you filed Form 1040A instead, it would be line 39. If you filed Form 1040EZ, it would be line 10. You would then take this amount and divide it by 4 to get the amount of each estimated payment you would make.
For example, if your 2014 tax was $4,000, you would make 4 payments of $1,000 each.
However, this may not be suitable for those whose income has had a substantial decrease. In this case, it is much more affordable to calculate your tax payments based on your current earnings. In order to use this method, you need to estimate what your income for the year will be.
Once you get this amount, you can estimate how much you will owe in taxes for the current year and divide that amount into 4 equal quarterly payments.
The best and most user-friendly calculator I found online to estimate your tax liability for 2016 is here: bankrate.com
Make sure to enter your estimate of your net profit (not your gross income) in the box labeled Business income or loss.
Example using Bankrate.com 1040 Tax Calculator
If, in 2016, you are single with no dependents and estimate that your only income will be $20,000 from Uber:
- The tax you would owe on your 2016 tax return would be $2,466.
- You would then divide $2466 by 4 to get $616.50.
- You would then make 4 quarterly payments of $616.50 each.
If your income increases or decreases later, you will need to adjust your tax payments accordingly.
How and when to make estimated tax payments
Your estimated tax payments for the 2016 tax year are due as follows:
|Payment Period||Due Date|
|January 1 – March 31||April 15|
|April 1 – May 31||June 15|
|June 1 – August 31||September 15|
|September 1 – December 31||January 15* of the following year.|
Note: If the due date for making an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next day that is not a Saturday, Sunday,or legal holiday.
To get information on all the various ways to pay your taxes, go to www.irs.gov/payments.
Otherwise, here is a summary of payment methods.
|Name||Payment Type||Web Address||Cost|
|Direct Pay||direct bank transfer||irs.gov||free|
|EFTPS *||direct bank transfer||eftps.gov||free|
|Official Payments Corporation||debit or credit card||official payments||fees apply|
|Link2Gov Corporation||debit or credit card||pay 1040||fees apply|
|WorldPay US, Inc.||debit or credit card||pay USA tax||fees apply|
PAY BY PHONE:
|Name||Payment Type||Phone Number||Cost|
|EFTPS *||direct bank transfer||1-800-555-4477 *||free|
|Official Payments Corporation||debit or credit card||1-888-UPAY-TAXTM (1-888-872-9829)||fees apply|
|Link2Gov Corporation||debit or credit card||1-888-PAY-1040TM (1-888-729-1040)||fees apply|
|WorldPay US, Inc.||debit or credit card||1-844-PAY-TAX-8TM (1-844-729-8298)||fees apply|
* You can use EFTPS to make payments online or by phone. The service is free.
To use EFTPS, you must be enrolled. You can enroll online or have an enrollment form mailed to you. To enroll, or for more information on enrollment, visit EFTPS® or call EFTPS® Customer Service to request an enrollment form:
- 1-800-733-4829 (TDD Hearing-Impaired)
- 1-800-244-4829 (Español)
For information on the different debit and credit card processors and their fees, go to irs.gov.
MAIL CHECK OR MONEY ORDER
To mail a check or money order, you must use a 1040-ES payment voucher. Go to irs.gov for exact instructions on what to do and where to send the payment.
State and local taxes
Most states and some cities/counties have income tax. If you live in a state or locality that requires you to pay income tax and file a return, you must also make estimated tax payments similarly to your federal tax payments. The 1099 you receive from Uber should report your state and local wages (box 16-18 on 1099-MISC and box 6-8 on 1099-K). For the most part, if these boxes are filled out, you may need to make estimated payments.
For more information, you should go to your state, city, and/or county website. You can view a list of state income tax rates at taxpolicycenter.org
Tracking your expenses
There are several ways to track your business expenses. You can use one or a combination of the ones below.
- Smartphone apps such as Expensify or MileIQ
- Accounting software such as Quickbooks Self-Employed
- On-board diagnostic system (OBDII) hardware like Zubie
- Online portals like Sherpashare
- Good old manual logs
Uber Tax Checklist
- Avoid tax penalties
→If you expect to owe at least $1,000 in federal tax, calculate and pay your estimated tax by the due dates.
→Check with your state and local government to find out if you are required to make estimated tax payments to them.
- Keep track of your mileage!
- Keep track of all your expenses using apps or manual logs.
- Save documents such as tax forms, bank and credit card statements, and receipts.
- Keep documents/receipts of major business related purchases such as a car or equipment.
- Don’t forget to track your mileage!
Do I have to report my income on my tax return?
Yes. You have to report all the income you make driving for Uber on your tax return whether you receive a 1099 or not.
What tax documents will Uber send me and when?
Uber is required to supply all their drivers with tax documents by February 1 2016. You should always wait until this day to file your taxes.
Which tax documents you receive depends on how much income you made during the year. You will receive a 1099-MISC if you made over $600. You will receive a 1099-K if you earnings exceed $20000 and 200 transactions.
If you made less than $600 you may not receive any tax document. Don’t take this as a reason to not report your income. You are required to report all your income whether you received a 1099 or not.
How long do I need to wait to receive my 1099?
You should receive a 1099 no later than February 1 2016.
Can I file my tax return before I receive my 1099 from Uber?
You should always wait until the 1099 due date to file your tax return. For tax year 2015 the deadline is February 1 2016.
Will I need to file a separate Schedule-C for each 1099-K and 1099-MISC?
You’ll only need to file one Schedule C since these both fall under your “driving services business.”
If you have other contract work that constitutes a different type of business, you’ll need to fill out a separate Schedule C for that.
What if Uber didn’t send me a 1099?
This happens more often than you think. Even if you don’t receive a 1099, you must still report all the income you receive.
Do I need to send the 1099s to the IRS with my taxes?
No. They are just for your records. Uber already sent a copy to them.
What mileage can I write off?
You can deduct mileage from driving around waiting for ride requests driving to a passenger driving home after dropping off a passenger and the driving you do before a ride is canceled.
Can you deduct miles when there are no passengers in your car?
You can deduct mileage from driving around waiting for ride requests driving home after dropping off a passenger and the driving you do before a ride is canceled.
Am I considered a business owner?
Yes. The IRS considers you a self-employed individual classified as a sole proprietor.
Should I form an LLC?
Running your own rideshare business means there is a lot more liability. The main benefit of an LLC is liability protection meaning, if something awful does happen, the LLC is liable and not you personally. Of course, there are probably legal loopholes.
I definitely suggest speaking with a lawyer about your specific situation, especially if you are making a substantial amount of money. And if your income is high enough, opening an S Corporation may provide tax savings as well as liability protection.
Online services such as MyCorporation will guide you step-by-step through the process of founding a company.
Should I pay my taxes with TurboTax?
TurboTax is one of the most common online tax software packages to prepare your tax return. The software guides you through the preparation of your tax return step by step by asking you specific questions. You can check out TurboTax here.
Uber Tax Guide Author
Isabelle Tanner is an accountant and tax preparer with over 25 years of experience. Isabelle is the founder and owner of A+ Accounting LLC.
I Drive With Uber and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction, tax preparation or similar activity.