The company share your car with an unknown or use to run various races is a market worth billions of dollars and many people take advantage of this new-age way to earn money. In fact, between 2012 and 2015, 10.3 million people have made money through platforms such as Uber, Lyft and TaskRabbit. That's more people than the population of New York City!
While offering shares of the economy for new career opportunities and can help us to expand our portfolio, it is important for participants to remember one thing :. you're probably not an employee
More than likely, if you're behind the wheel for Uber or delivery of goods through TaskRabbit, you are considered an independent contractor
[and this is a different world regarding taxes, because it is likely that your paychecks do not have all the taxes taken.
But you still have to pay federal and state taxes as well as self self-employment tax (which consists of the Social Security and Medicare for those who work for themselves).
If this sounds confusing, do not worry. We have the low down if you know how to stay in the good graces of Uncle Sam.
For the IRS, you are a business owner
First things of on board. That Uber is your full-time gig or you just shuttle people around every now and then, you should pay attention to how much income you are earning.
If you make money as a driver-wrinkle hand-runner race or grocery-getter, you must report your earnings on Schedule C, Profit or Loss from Business.
for many taxpayers who do not keep their books, Schedule C is the best way to actually determine whether they have $ 400 or less of net income.
However, there is another warning. If you make more than $ 400 in self-employment income throughout the year, you will also need to complete Schedule SE, the self-employment tax.
This form is used to calculate the self-employment tax because of your net income. Fortunately, TaxAct it is easy to complete both forms. Once you enter your information in Appendix C, the software determines if the annex if necessary and, if applicable, complete automatically.
After this amount is determined, you may have to start paying taxes on quarterly estimated income to avoid a big tax bill and penalties when it comes time to file your return.
Since taxes are not automatically removed from your winnings, you have to account for them separately. To prepare quarterly tax payments, make sure you set aside money throughout the year to cover these costs.
A simple way to save is to have a portion of your monthly income automatically transferred to a separate account.
Offset with tax deductions
Driving for Lyft or Uber can be as simple as pressing a few buttons on your phone, but do not forget to keep track of your spending is a little more difficult.
first, make sure to connect your mileage while you're on the clock! You'll want to report the miles as a business expense on your tax return using Schedule C. claim them as expenses will help reduce your business income -. Which means you'll probably need less tax
as MileIQ Apps can help you track how much you drive for work. In addition, record keeping gives you backup if the IRS never asks for support linked to a deduction.
Drivers can also deduct other expenses related to the automobile, as these costs are related to their business. This includes the basic service, repairs, car payments, rental fees, registration, insurance, tolls and more.
In addition, you can deduct the depreciation on the car, parking fees, drinks for passengers and a part of your cell phone bill.
distribution business expenses against total expenses is another way TaxAct can help.
For example, regarding the number of business miles driven compared personal miles, simply enter your data and the software will quickly help you solve this problem.
Even if you are not making money as an Uber driver or Lyft, you can still deduct expenses related to the vehicle if you work for services such as Instacart and TaskRabbit. Mileage, and many of the same operating expenses can be deducted on your tax return as well.
Pay attention to what 1099
When approaching tax season, you'll probably receive a version of 1099 in the company's mail through which you contract your business . Total payments treated your customers are reported on Form 1099-K form, payment and third party network transactions.
Keep in mind that amount will probably be higher than the amount that you saw hit your bank account as it includes commissions of the race action and business costs of other services.
All other payments you receive, such as references or non-driving related premiums are reported on Form 1099-MISC. This form should arrive in your mailbox at the same time. All income documented on these forms must be reported on Schedule C when you file your tax return.
There is a small chance that you will not receive a 1099-K whether the company through which you provide services treated under $ 20,000 in payments or less than 0 transactions under your name.
Even if you do not receive this form, you will still need to declare any income earned in Schedule C and pay tax on income you earned.
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