Updated: October 3, 2018
As more people become Uber drivers, we often hear questions like does Uber take out taxes and if so, how do Uber drivers pay taxes? In this free Uber tax guide, we'll provide a checklist that lets you know your tax liability, as well as some tax tips and deductions. While this is focused on Uber, you will find that many of these Uber tax guide tips are applicable to Lyft drivers and other rideshare drivers.
Uber driver tax checklist
As part of the Uber tax guide, it’s important to look over the Uber driver tax checklist every professional driver should know. Here are the essentials:
- Know what taxes you have to pay
- Uber will file IRS Form 1099-MISC and/or 1099-K with the IRS and your state tax agency if you were paid over $600 during the year
- Be ready to pay estimated quarterly taxes
- Keep track of your miles and expenses
- The mileage deduction can save you major dollars at tax time but only if you have proper records
- Know what deductions you are eligible to claim
- File the proper tax forms
Is Uber self-employment?
Yes. When you drive for Uber, you are regarded as an independent contractor, not an employee. This means you'll receive a 1099-tax form at the end of the year-employees receive a W-2.
Being an independent contractor can have a major impact on your tax bill. It can also have an impact on what deductions you can take to lower your tax liability.
While there are some new legal challenges on whether Uber drivers should be employees, they will continue to be classified as independent contractors for the foreseeable future.
Do Uber drivers get a 1099?
Uber drivers are described as self-employed individual "partners" and fall under 1099 tax rules. For driver services, this falls under 1099-K rules and any other payouts would land under the 1099-MISC rules. These other payouts could include referral fees, bonuses and more. You can procure your needed Uber driver tax information by logging into your Uber partner portal.
How do Uber drivers pay taxes?
Uber classifies its drivers as independent contractors. An independent contractor is a non-employee who is running their own business. Uber doesn't provide you with any employee benefits like health insurance or vacation. It also doesn't withhold any taxes from your compensation.
Every year, Uber will file IRS Form 1099-MISC and/or 1099-K with the IRS and your state tax agency reporting how much it paid you. This applies if you were paid over $600 during the year.
You need to report this income on your tax return and pay income tax and self-employment tax (Social Security and Medicare tax) on the net profit you earn from your ridesharing business. Of course, you can deduct certain business expenses.
Do you have to report Uber income?
For the majority of you, the answer is "yes." If your net earnings from Uber exceed $400, you must report that income. You should file a Form 1040 and attach Schedule C and Schedule SE to report your Uber income.
If you're not required to file an income tax return and your net earnings from Uber are less than $400, you aren't required to report your Uber income.
I'm an Uber Driver. What taxes do I pay?
Let's say you are a sole proprietor. It's how the vast majority of self-employed people, including Uber drivers, operate their businesses.
When you're a sole proprietor, you and your business are one and the same for tax purposes. You don't pay taxes or file tax returns separately for your sole proprietorship. Instead, you report the income you earn on your own personal tax return, IRS Form 1040.
To show whether you have a profit or loss from your sole proprietorship, you file IRS Schedule C, Profit or Loss From Business, with your return. On this form, you 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.
When you're a sole proprietor, you must pay self-employment taxes on your net income. You have to also pay your income taxes, too. This is so even though you are of retirement age.
Self-employment taxes are the Social Security and Medicare taxes sole proprietors pay. When you're an independent contractor, you have to pay all your Social Security and Medicare taxes out of your own pocket.
Uber won't pay half of them for you (employers must pay half of these taxes for their employees, but not for contractors). These taxes are substantial: the Social Security tax rate is 12.4 percent and your Medicare tax is 2.9 percent on the first $128,400 of your covered wages but you are able to deduct the employer portion. You file IRS Form SE with your tax return to report and pay these taxes.