Los Angeles is a city where hard-working ride-sharing drivers are the norm.
Driving for a rideshare company makes you an independent contractor and will qualify you as self-employed. Keep in mind that in the eyes of the IRS you are a business owner and you’ll need to file these important forms with your taxes.
We always advise our clients to do the following tasks:
- File your taxes
- Track your deductions
- Pay quarterly taxes
- Understand self-employment tax
Our brief guide that will save you hundreds and take home more of your paycheck. Think of it as a “tax bill reduction approach” and take home more of your profits.
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Operating Expense Deduction
For 2019, the standard mileage rate is 58 cents/mile. Multiply your accrued business miles driven by $.58 and you’ll get your mileage deduction.
These are costs associated with solely rideshare business. Most drivers miss these deductions by not recording them carefully.
- Mileage- this is straight forward the mileage you rack. Mileage tracking apps are available for free and paid subscription plans.
- Uber or Lyft fees and commissions- This could be tracked on your rideshare account.
- Gas- Set up a trackable spreadsheet using an app so you can log it in every time you fill-up. Some of the paid apps can track that too (tax-deductible).
- Maintenance- Oil changes, brake services, general repair, wiper blade change, wheel alignment, and any other repairs
- Car washes- This will cover detailing to maintain the external and internal looks of your vehicle.
- Meals-
- Insurance-
- Phone- Your phone plan, accessories like chargers, cable and mounts could be deducted as a legit expense. It is important that you have a separate phone for business.
- Toll fees- The transponder and the toll fee itself will be covered by the deduction.
- Parking Fees- Keep the receipt of the parking fee, larger cities have expensive parking fees. It’ll add up after a while.
- Depreciation- You can accelerate the depreciation cost. Your tax professional can fill this out for you.
- Mileage Tracking apps
- Vehicle tools- battery jumper devices, Tire pressure gauges, first aid kit, car tools, and even floor mats can claim deductions.
Paying Quarterly Estimated taxes
Usually, if you’re employed a portion of your Medicare and social security taxes is taken out of each paycheck, the remaining half is paid by your employer. If you drive for Uber or Lyft, you are self-employed and you need to pay your own taxes during the tax year.
If you consistently drive for a rideshare company with estimated earnings of $5,000, you’ll approximately owe $1,000+ in estimated taxes.
Failing to track your expenses will increase your taxable income and you’ll incur a bigger tax bill by the end of the year. Therefore, washing out most of the income gains that you earned.
Remember! A tax deduction reduces your taxable income; therefore, you’ll significantly reduce your tax bill if you record these expenses meticulously. Paying these taxes regularly and on-time will reduce your stress and will give you valuable education on how to have a correct mindset with your business.
1099 forms arrive in January
Being a rideshare driver, you’ll be receiving an IRS-1099 Misc or 1099 K form instead of a W-2 form.
Box 1a. is the important information on that form.
Local Tax has a number of rideshare drivers that drop-off there returns and get on with their day. We have a fair share of drivers that get overwhelmed with forms and details of filing there returns.
In some instances, there are other 1099 forms that might come in the mail.
If you have questions or you would like to drop-off your document you can schedule it here. Let us know, we are here to help.
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