In my previous post about how I’ve made $862 in 1.5 weeks delivering food, I closed with the fact that I expect to owe $0 in independent contractor taxes. This post will explain exactly what I plan to do in order to make this a reality.

Before we begin, if you have any questions about your own taxes, please consult a tax professional (specific information may only apply to the US).

I heavily researched independent contractor taxes before I began my journey to become a delivery driver. I really wanted to make sure I understood tax law, deductions and filing requirements before I began making any income.

As a delivery driver for Uber Eats, DoorDash, Postmates, GrubHub and more, you will be classified as an independent contractor. That means that you are your own boss and will be responsible for your own taxes but you’re eligible for business-related deductions.

If you would like to go the easy route, it is recommended that you save 20-30% of your income for tax time, depending on your earning and tax bracket.

If you would like to SAVE money at tax time, tracking earnings and expenses could really add up.

Requirements for filing independent contractor taxes

You will receive a 1099 each year from the company you contract with. This applies only if you were paid over $600 during the year.

However, if your net earnings from your contract work exceed $400, you still must report that income. You will be required to file a Form 1040 and attach Schedule C and Schedule SE to report your income.

To show whether you have a profit or loss from your delivery business, on the Schedule C form you will list all your business income and deductible expenses.

You only pay tax on the profit you have left after you subtract all your expenses from your business income. This is exactly why I don’t think that I’ll have to pay any taxes this year, addressed further in the deductions section below.

Great news! If you aren’t required to file an income tax return and your net earnings are less than $400, you aren’t required to report that income (IRS reference).

What taxes do delivery drivers pay?

• Self-employment taxes (Schedule SE)
  • Social Security and Medicare
• Income taxes (Form 1040)

When you’re an independent contractor, you must pay self-employment taxes on your net income in addition to your income taxes.

The company you contract for will not pay half of them for you (employers must pay half of these taxes for their employees, but not for contractors). Instead, you will file the IRS Form SE with your tax return to report and pay the self-employment taxes.

I know it may sound complicated but tax preparers and DIY tax filing systems (like TurboTax or H&R Block) will figure this out for you as well.

What expenses can delivery drivers / independent contractors deduct?

It’s very important for you to keep track of all the deductible expenses you incur throughout the year since they will decrease the amount of profit you’ll have to pay taxes on.

Your biggest deduction will be your car expenses. You can deduct these expenses by using one of the two following methods:

• Use the standard mileage rate of 54.5 cents per business mile you drive in 2018.
• Deduct your actual car expenses like gas, repairs, depreciation, maintenance, oil, registration and more. View the IRS instructions.

The standard mileage rate is the most popular because it requires less record keeping. Regardless of what method you use, it is crucial that you keep track of your business mileage.

How to track mileage as a delivery driver

I use the free mileage tracking app Everlance, because duh, I love free stuff. You could also use a similar app or track your mileage manually. If you decide to take the standard mileage rate, per the IRS, you must do so the first year you’re “in business”. Then in later years, you can choose either method to deduct your expenses (IRS car expense reference).

Everlance has automatic trip detection and you can start and stop trips, which helps for anyone working for multiple companies. I have a business line for each of the 3 companies I work for which makes it easy to classify my business trips. When you decide to export your data, Everlance will email you a spreadsheet with all of your trips organized and ready for tax time.

You can also use the app to track expenses, revenue and much more. If you don’t do anything else, please download a mileage tracking app before you start making deliveries.

Additional deductions to consider for delivery drivers

• Phone & Service (100% deductible if you use it just for business, otherwise you can deduct the portion used for the business)
  • Example: If I work 4 hours a day, 4/24 = 16% of phone use
• Delivery Gear (Insulated bags, shirts, etc)
• Parking and tolls
• Commissions and fees your company may charge you
• Interest on a car loan (only the business use portion is deductible)

If you track all of your expenses from the beginning you won’t have to stress when tax time comes around. Check out the Schedule C to view all of the expenses available for deduction.

Do I need to pay estimated taxes?

Since this topic is very complicated and is dependent on numerous factors, I’m going to direct everyone to the Estimated Taxes article on the IRS’ website.

The short answer: if you expect to owe more than $1,000 in tax for your delivery business you must make quarterly tax payments. In order to owe more than $1,000 in tax, you would have to earn more than $5k in PROFIT. Fill out the Estimated Tax worksheet to see what your estimated taxes will be.

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That’s it! After claiming mileage and expenses, I plan on owing the IRS $0 in independent contractor taxes once tax season comes around. Your results may vary, so please consult a licensed tax professional if you have further questions.

$tay Wealthy Friends,

— Dannie

More resources on the topic:

• https://turbotax.intuit.com/tax-tips/self-employment-taxes/the-self-employment-tax/L8xXjolB4
• https://www.irs.gov/pub/irs-pdf/f1040es.pdf

Have you ever filed independent contractor taxes?

What was your experience?