Being an Uber driver can feel like you’re running your own business, and as far as the IRS is concerned, you are. If this is your first year driving for a rideshare company, you may have questions about taxes. How are they paid? Will you be responsible for keeping track of them?
Here’s what you need to know about taxes.
Uber Drivers File a 1040
Uber drivers are considered self-employed in the eyes of the IRS. That means drivers receive a 1099 tax form at the end of year. Employees of businesses typically receive a W-2.
Drivers fall under 1099-K rules, and other payouts fall under 1099-MISC rules. Other payments may include bonuses, referral fees and other income received.
The Uber partner panel provides driver tax information.
Uber Drivers are Responsible for Filing and Paying Their Own Taxes
Uber does not withhold taxes for drivers, and this applies to other ridesharing platforms, including Lyft. That means drivers are responsible for paying their own taxes, and are treated as independent contractors.
Independent contractors are considered business owners. Uber does not provide benefits of any kind, and that includes withholding your taxes.
Taxes are far more complicated when you run your own business. If you make a significant income through Uber driving, you may want to hire a professional accountant.
“Filing taxes—and meeting tax deadlines—is simply part of being a business owner,” says JAK CPA. “But taking on tax preparation by yourself can leave you with headaches and, if your tax filings are deemed noncompliant, much worse.”
Each year, Uber will file a Form 1099-MISC and/or 1099-K with your state tax agency and the IRS.
Uber Drivers Pay Self-Employment Tax
Because you are considered an independent contractor, or business owner, you will be responsible for paying self-employment tax, which covers Medicare tax and Social Security tax. You’ll also be responsible for paying income tax.
Independent contractors like yourself must pay all of Medicare and Social Security taxes. Employers typically pay half of this cost for their employees, but you have no employer.
Self-employment tax can be substantial: 15.3% flat rate on the first $118,500 earned in net income. IRS Form SE is filed with your tax return to pay and report these taxes.
If you earn more than $400 through ridesharing, you’ll need to report that income. You will be required to file a Form 1040 with an attached Schedule SE and Schedule C.
If you made less than $400 and are not required to file an income tax return, then you will not have to report your Uber income.
Uber Drivers Can Deduct Expenses
Just like any other business owner, Uber drivers can deduct expenses, including:
- Car expenses, including mileage
- Part of the cost of your smartphone (100% of the cost if you use it solely for business)
- Extra insurance coverage you have to purchase for rideshare driving
- Any items you provide to your passengers
- Parking and tolls
- Transaction fees you pay
- Interest on car loans
- Home office deduction if you use a portion of your home for administrative tasks or record keeping (must be used exclusively for business)
- Commissions and fees charged by Uber
It is your responsibility to keep track of these expenses, and to keep record of them.
