- RMI-INSPECTIONS
How do I do my Uber and Lyft Taxes?
Updated: Jan 12, 2021
Tax time will be here before you know it and because of Covid-19, there are a lot of new ride-share drivers that have been forced to supplement their income with ride-share driving. A lot of new drivers are going to have to do their taxes as an independent contractor for the first time which can be scary and leave people feeling like they do not know where to start.
That is why we have put together a full ride-share tax guide including the best place to go to get your ride-share taxes done, the documents you will need and where to find them, as well as a run down on exactly how to do your ride-share taxes. Do not get discouraged. Follow the guide below and you might even receive money back on your taxes. Good Luck!
RideShare Tax Season Guide
(*FIRST OFF: Driving for Uber/Lyft means you are an independent contractor and responsible for your own finances. You are responsible for putting money away every month to cover your owed taxes come tax time. Uber and Lyft do not deduct owed taxes from your payouts. So what I do, for example, is If my goal is to make $100 everyday that I drive, then I always make sure that once I get to $100, I do 1-2 more trips to get to $105-110 and put that extra $5-10 aside for taxes.)
Where to start:
Being a rideshare driver gives you access to certain deals on tax software. I use TurboTax every year because it is through Uber and the annual deal they offer which includes, depending on your status, free federal and state. The most you can spend, again, depending on your status, is about $60 total and that $60 can be deducted from your return amount.
The important thing to remember is that the deal is only available until February 20th. So, you have to be ready to do your taxes early in the year so you can take advantage of this great offer and service that Uber and TurboTax have partnered together to provide for their drivers. Plus, then you can get your taxes out of the way and not have to stress about them the rest of the year.
How do you gain access to the Uber/TurboTax offer:
First, open your Uber Driver app. --->Next click on the hamburger icon in the upper left hand corner of the home screen. --->A drop down menu will appear. --->Scroll down and click on “Uber Pro.” --->You will be directed to your Uber Pro dashboard. --->Scroll down and click on “TurboTax Self-Employed discounts.” --->Scroll to the bottom and click “Access Offer.” --->you will be directed to a login page. --->login using your Uber account information to connect to the TurboTax software.
Next Step: (Understanding your Income/Expense statement)
Before you can begin the tax return process through TurboTax, you will need to access your income/expense statement for the year that Uber provides for you.
You’re probably accustomed to receiving a W-2 from your employer to document your earnings. If you have a “day job” in addition to your ridesharing gig, you should receive a W-2 from your regular employer and file it with your tax return as usual. Uber, however, will not send you a W-2. Instead, it will report your earnings on two other forms:
1. 1099-K - (For your driving services)
2. 1099-MISC - (For any other income you are paid such as bonuses or referral fees)
*It is important to note that you will only receive these two documents from Uber/Lyft if you made over $20,000 in the year or if you received more than 200 payments. So, if you did not receive these documents, do not get frustrated or confused, it is because you did not make more than $20,000 in the fiscal year. Instead Uber/Lyft will provide you with what they call a “Yearly Summary” which will act as your 1099-K/1099-MISC.
So, where do I find these documents: (1099-K, 1099-MISC, OR Yearly Summary)?
To gain access to these documents you need to go to----> drivers.uber.com
You will login using your same login information that you use to login to your Uber driver account in the driver app. Once you sign in, you will see an option bar at the top of the page. Click on “Tax Information” and you will be directed to the documents you will need to begin your tax refund.
*It is Important to note that:
Uber drivers receiving a 1099-K for the first time often are surprised to see that the income reported is greater than the amount they actually received in payment.
That’s because IRS tax rules require Uber to report the full amount the customer paid, including the company’s commission and other fees.
Form 1099-K refers to this as the “gross amount of payment card/third party network transactions.”
Don’t worry. You can deduct the extra amounts.
In fact, Uber makes it easy to deduct the correct amounts by providing a “1099-K Breakdown” on its tax summary page. This gives you the totals for:
Tolls
Split fares and miscellaneous fares
Safe ride fees
Airport and city fees
Black car fund
Sales tax
Booking fees
And other taxes paid over the course of the year, all of which can usually be deducted from your business income.
The tax summary also provides annual amounts for “other items” included in the 1099-K gross amount, including the Uber fee and your device subscription amount.
Here is an example of what your “Yearly Summary” will look like:
*This particular individual made a GrossEarning of $37,674.70 for the year. This includes both the drivers payout as well as Uber’s commission. The Net Payout of $25,043.75 is the actual amount that the driver received in payment or direct deposit. The Expenses, Fees and Tax of $12,630.956 is basically the difference between the two. There will be a second table that will break down your entire expense report.
Here is an example of what your “Expenses” table will look like:
*This is the actual breakdown of your Expenses, Fees, and Taxes. This is extremely important information to have because you can deduct all these expenses so that you do not have to pay taxes on them. The TurboTax software is extremely good at guiding you through the process of deducting these to the point where all you have to do is fill in the boxes that correspond to your expense report shown above. It is as easy as that. So do not let yourself get frustrated or stressed with this process. If you do, as it happens to most of us, take a 5 minute break and then get back to it!
(Now that you have your required documents and understanding of those documents to begin your tax refund, let’s take a closer look and get an understanding of which form inside TurboTax you will report your earnings and losses on)
Schedule C, Profit or Loss from Business
You’ll report the income you earn as a rideshare driver on Schedule C, Profit or Loss from Business, which you’ll file along with Form 1040.
*If you’re moonlighting as an Uber driver to supplement income from another job, you’ll report both incomes on Form 1040
If you earn self-employment income from a different type of business, such as Airbnb hosting services, you’ll need to file a separate Schedule C for that business. The same is true if you earn income as a wedding singer, yoga teacher, or anything else. Generally, each separate type of business you run requires a separate Schedule C. You’ll enter the total income from all of your businesses on Form 1040.
(Now, Let’s dive into the deductions for your business and the best way to get the most money back)
Deductions for mileage and the business use of your car
The Uber tax summary of total online miles includes all the miles you drove waiting for a trip, en-route to a rider, and on a trip. You can claim any other business-related mileage, such as the mileage you drove to ride requests, the mileage you drive after dropping off the passengers if you're waiting for another ride, and the mileage you drove before rides were canceled. However, you must keep careful records of your off-trip mileage. What I always do is take a picture, with my phone, of my odometer as soon as I get in my car and then another picture as soon as I pull back into my driveway before I sign off. This way you will have documented the entire amount of miles driven during that shift. *If you think you might have trouble remembering to do this, there are also many mileage tracking apps that can be used to track your miles.
There are two ways to calculate the business use of your car: