What Uber Drivers Need To Know About Taxes

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Source: uber.com

Did you know that you must file a special tax return annually when you drive for Uber? Well, you need to!

And that’s a good thing. While Uber drivers don’t make money off their earnings, they still have to report their income to the government to pay taxes. And that means that you should be filing a tax return every year. Here are five things you should know about Uber driver taxes to avoid any nasty surprises.

1. Uber drivers make money from tips

Source: bloomberg.com

Uber drivers don’t make money off their earnings. But they still have to pay taxes on their earnings. That means that every time you drive, you need to file a special 1099-MISC form (Click here) with the IRS.

You need to make sure you report your income correctly

If you aren’t sure whether or not you need to file a 1099-MISC form, there are many different factors to consider. And you also need to make sure you file a return that accurately reflects your earnings.

You need to be aware of what’s required to file

Source: turbotax.intuit.com

Even if you don’t make much money as a driver, you still need to make sure that you are filing a return. Some requirements are necessary to do so. And you also have to make sure that you have filed all the right forms.

You need to be aware of the deductions

You could be entitled to many deductions depending on how much you make each month. For example, you could deduct your car expenses or even the depreciation on your car. If you have expenses associated with your vehicle that exceed the amount you earn, you may consider taking those out as a deduction.

There are a lot of rules you need to follow

While you should be filing a special return with the IRS, there are some other rules you must be aware of. You should also make sure you know the IRS’s rules regarding your deductions, withholding, and refund.

2. How much money should I set aside for taxes Uber

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In most cases, it depends on the person. Some people claim that if you have made a profit, you should save 10% of that profit to file taxes, but it’s hard to determine how much profit you made.

You most likely have to use one of the tax calculators on the internet. Let’s say you earned $1,500 on your first week. It is hard to tell whether that was a huge success or a flop.

Some factors can be considered when calculating your income, such as the number of rides you have delivered, the length of the route, the type of vehicle you drive, and the price of each ride.

In addition, there is a lot of uncertainty when calculating how much you will earn and if you will make a profit or not. However, the point is that you need to take the right decision and not get discouraged.

You must consider your income and expenses because you can always come back to Uber and decide to switch your current income to a lower one.

3. How to calculate the amount of income you should set aside for taxes

The amount of income you need to save for taxes depends on several factors, such as the time you will be working for Uber, the type of vehicle you drive, the price of each ride, etc.

Let’s say you are a young entrepreneur who has recently started your business and is still paying rent. You are not sure how much you will earn and if you can cover the expenses. As a result, you must set aside 10% of your income for taxes.

It does not matter what percentage you choose, as long as it is high enough. I suggest you start by saving 20% of your earnings, and once you are sure of your success, you can adjust this number.

However, remember that the percentage is usually calculated after working for a while. You will not be able to save for taxes if you start working for Uber immediately. You can save money for taxes if you are still a student and work part-time, especially in states with high taxes.

You can always adjust this number according to your situation.

4. What happens if you don’t get 1099 from Uber

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As a new driver for Uber, I was confused about what would happen if I didn’t receive a 1099 form from the company.

I found out that most states will consider your earnings from driving for Uber to be income. However, there are certain states where you are considered self-employed, and these are the states where you will not need a 1099.

For example, if you work in Colorado, Pennsylvania, California, New York, Massachusetts, or Virginia, you do not need to worry about getting a 1099 form. Because you are considered self-employed, these states will not count your earnings as taxable income. This means you can work as an Uber driver without worrying about filing taxes.

However, if you work in other states, you will need to make sure that you file your taxes correctly. You can use the IRS website to determine whether or not you need to file your taxes. The IRS states that you must file taxes if you earn over $600. You can also file your taxes using TurboTax or TaxAct, both free online tax software programs.

If you are planning on becoming an Uber driver, you should first understand that you will be required to pay taxes on any money that you earn as an Uber driver. This is because the money you make working for Uber is considered wages.

The IRS may require you to file your taxes if you earn a lot of money. However, you may not need to file your taxes if you only make a few hundred dollars. It’s highly recommended that you speak with a CPA before becoming an Uber driver. They will be able to explain everything to you so that you are comfortable with the process of filing your taxes.

Filing your taxes is the next step. If you are a resident of a state that does not require you to file a 1099, you should not be worried. In the case of a state requiring you to file a 1099, you should talk with a CPA specialising in filing taxes for Uber drivers. He will be able to tell you exactly how to file your taxes for the year so that you do not have to spend money on hiring a lawyer.

5. Can Uber deduct car insurance

In the past, Uber had stated that their drivers were not employees of Uber but independent contractors. This was a change from their previous policy. But since this, Uber has been under scrutiny. They are accused of misclassifying their workers as independent contractors and paying them less than minimum wage.

This means that Uber is not legally obligated to provide benefits such as healthcare and paid leave to its employees. If a driver wants to claim their full expenses through their taxes, they have to cover the cost of the vehicle, gas and car insurance.

But with the change in their classifications, there are some questions regarding their deductions for those costs. While a standard employer would be able to deduct those expenses, the driver has to prove they qualify as self-employed. So if they have to claim self-employment, they can deduct all their expenses from their income.

So, if Uber is considered a traditional company, they would be able to deduct those expenses from their income. But if they are considered a contractor, they would be unable to deduct any of those expenses. And while this may sound like a loophole, it is how the law works.

Now, let’s look at how they would be able to claim all of their expenses.

What income does Uber report to IRS

Source: foxbusiness.com

Income from Tips: When driving for Uber, you will likely receive tips for your passengers. The IRS treats these tips as income; you must include them on your W-2 form. But don’t worry, you can deduct the tips you’ve received from your business expenses. If you have a lot of tips, you may want to consider hiring someone to assist you.

Income Above Minimum Wage: While your base pay is below the minimum wage, you still earn money above that amount. In 2017, the national minimum wage was $7.25 per hour. Uber drivers who receive more than $7.25 per hour are considered self-employed and must include that income on their 1040 form.

If you’re not sure if you’ve made more than $7.25 per hour, you can look at the total amount of tips you’ve received during the course of the year and subtract that amount from the amount of money you were paid. For example, if you made $10 per hour and your tips amounted to $200, you would need to add $200 to your 1040.

Conclusion

Uber drivers must be aware of the various tax issues they must be concerned with. While Uber has many different things to avoid paying tax, they may still be facing the consequences if they don’t pay the right amount of tax, if they don’t file the right forms, or if they do not get all of the tax they are due. Tax problems may include not filing the correct forms or not paying enough taxes.