How to File Uber Taxes

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Contributor, Benzinga
Updated: May 6, 2021

Whether you drive for Uber full-time, or to pick up a little extra cash on the weekends, you’ll need to pay taxes on earnings exceeding $600. Even though you are working through a ride-sharing app, you are not considered an Uber employee. Instead, you are considered to be an independent contractor and need to file your taxes correctly to reflect this. If this is your first time filing taxes under the self-employed classification, make sure you understand how to file and the deductions that you’re eligible for. We’ve provided a guide to help you navigate this, and to avoid a fee or penalty from the IRS.

Welcome to the Gig Economy: How Uber Drivers’ Taxes Work

When you drive with Uber, you agree to track your earnings as an independent contractor. You may also sometimes be referred to as a 1099 contractor. This is a reference to the 1099-MISC or 1099-K form that you’ll receive from Uber detailing earnings for the year. Independent contractors enjoy more freedom when itemizing their deductions from their taxes but, in return, they also must bear a higher tax burden. Independent contractors are required to pay the entirety of their contributions to Social Security and Medicare, while employees only have to pay half of their total required contribution.

Self-employment taxes can take a serious toll on your budget if you don’t correctly and regularly catalog your expenses. This is why it’s especially important for Uber drivers (and other 1099 contractors) to take careful notes on every purchase or repair they make related to their business, so they can save money in deductions when Tax Day rolls around.

How to File Taxes as an Uber Driver

Filing your taxes as an independent contractor is more difficult than filing taxes as an employee. We’ve broken down the steps you’ll need to take to file your taxes on time and without any penalties.

Step 1: Gather Necessary Forms

Uber will send you a few forms at the beginning of the year to help you get started on your taxes, including:

Tax summary

Your tax summary is a supplementary document from Uber. It is not an official tax form from the IRS, but a detailed breakdown of how many miles you’ve driven, how many rides you’ve given, and how much money you’ve earned during the previous tax year. Uber’s tax summaries include your gross earnings, how much money you made after fees, and an estimation of your potential tax liability. Uber has stated that all tax summaries for the 2018 tax season were uploaded online at partners.uber.com on or before January 31st, 2019. If you have elected to receive documents online, you may also see other tax documents in your partner tab.

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Source: https://www.uber.com/drive/tax-information/tax-documents/

1099-MISC

Ever Uber driver who earned more than $600 in 2018 will receive a 1099-MISC form. The 1099-MISC is a very simple document that lists the gross sum Uber paid to you in the previous year. Your 1099-MISC does not include any deductions for income tax or Social Security and Medicare contributions. If you have elected to receive tax documents online, your 1099-MISC will be available in your partner tab beginning on January 31st. If not, you will receive your tax documents by mail.

1099-K

A 1099-K is a document that includes a breakdown of your annual on-trip average earnings. Only Uber drivers who received over $20,000 from Uber in 2018 and who gave more than 200 rides. If you do not meet both of these conditions, you will only receive a 1099-MISC. Like your 1099-MISC, you may access your 1099-K via your partner tab if you have elected to receive electronic documents or Uber will mail a copy to your home. Collect your tax documents and any other supplementary documents (like W-2s from an employer or other 1099s from side ventures) and have them on-hand when filing your taxes

Step 2: Consider these common Uber driver deductions

Tax deductions are recorded expenses that reduce the amount of taxable income that you pay dues on. Independent contractors have the option of choosing a standard deduction ($12,000 for single filers or $24,000 for married couples filing jointly in 2019) or itemizing their deductions. Itemized deductions are individual costs associated with operating as a partner through Uber. Some of the most common deductions that Uber drivers can take advantage of include:

Standard Mileage

The easiest way to get credit for your Uber mileage is by taking the Standard Mileage Rate. The IRS has determined that ride-share partners (and anyone else who drives for business) may deduct 54.5 cents per mile that they drive from their taxable income. This can equal big bucks for Uber drivers from the offset. But did you know that Uber doesn’t list every mile you may deduct on your tax summary? From the moment you get into your car until the moment you arrive home, you may deduct any miles driven searching for passengers, in-route to passengers, and specially requested stops that weren’t recorded by Uber’s app. Uber’s tax summary document only lists miles that were recorded while on trips, so make sure you take careful notes detailing how many miles you spent “off the radar” while still on the clock.

Gas

You may deduct the cost of gas you use transporting passengers, meeting with potential drivers who you’re looking to recruit, or driving into a more profitable area for a day of work if you live in the countryside. It can be difficult to estimate exactly how much gas you use working as opposed to how much you use while running personal errands, so you may use a percentage estimate. For example, if you use your car for driving Uber 70 percent of the time and for personal use 30 percent of the time and you incurred $3000 worth of gas charges in the past year, you may deduct $2,100 (70 percent of $3,000) from your taxable income.

Insurance

You may deduct the cost of your insurance using the same percentage system used to calculate your gas deduction.

Toll and Parking

You may fully deduct the cost of any toll charges or parking costs you incur while driving passengers where they need to go. This includes metered parking, garage fees, and any other costs related to business travel.

Mobile Phones and Chargers

You can’t use Uber without a cellphone, so your smartphone is technically a business asset, even if you originally purchased it for personal use. You may deduct the cost of chargers, phone upgrades, and service expenses only as a percentage of the time that you use it for Uber-related calls and texts.  

Step 3: Choose how you want to file

Pick one of theses methods.

File by hand

Filing your taxes the old fashioned way involves sitting down with a pen and the necessary IRS forms downloaded from IRS.gov. Filing by hand is an affordable and educational option for taxpayers who want to learn more about the taxation process. However, it can be tedious for self-employed individuals who usually have more complicated tax situations. Uber drivers are recommended to choose another filing method to avoid losing money in forgotten deductions and credits.

File using a tax software program

Tax software programs (like those available from H&R Block or TurboTax) can guide you through the filing process with simple questionnaires and in-program assistance.  Tax software for self-employed individuals can help you maximize your deductions and comes pre-loaded with tools that you can use to minimize your tax liability. Filing through tax software is a great option for anyone with one or two streams of income and relatively simple taxes.  

Filing through a CPA or service

You may choose to work with an accountant or tax filing service to assist you in figuring out your return. Filing through a tax professional gives you the benefit of a human touch on your return. It can also help taxpayers with very complicated situations figure out how best to avoid auditing. Filing with a tax pro is also usually the most expensive option but it’s typically the best choice for men and women with multiple streams of income or a very high annual household income.

Step 4: Get ready for the new year

After you’ve filed your return, you’ll want to take steps to ensure that you’re recording your mileage, fuel costs, and toll charges throughout the next year to make taxes easier. Keeping a notepad to record mileage in your vehicle along with a folder to save any receipts you get for business-related expenses can save you tons of time and stress when tax season rolls around again.

Final Thoughts

Personal finance software is a self-employed taxpayer’s best friend. The best personal finance software allows you to upload photos of your receipts and expense forms to save for a later date. Investing in one of our favorite personal finance software programs can help you operate as a more effective Uber driver — and you may deduct the cost of the program from your return next year.