How To File DoorDash 1099 Taxes 101
No matter if you deliver for DoorDash, Amazon Flex, Postmates, or GrubHub being a self employed delivery driver can be quite thrilling. You never know where you will go next, you can listen to music in your car while you drive and nobody is looking over your shoulder. Whether you are a full-time independent contractor or simply looking to make some part-time side hustle money, being a delivery driver rocks!
But with the added freedom comes more tax liability and responsibility. From expense tracking to knowing when your quarterly taxes are due, figuring out your DoorDash 1099 taxes can feel overwhelming. You have to know what to do or else the United States IRS will come knocking.
In this article:
- What exact taxes you have to pay
- Where and how to find your 1099 income form
- What business write offs to deduct as a delivery driver
- Filing quarterly taxes
Guide to Reporting Your DoorDash 1099 Income
I get it filing your tax return sounds complicated. If your heart is pounding out of your chest right now, don't worry, Keeper Tax has your back. We will make this process as easy to understand as possible. You will become excellent at reporting your taxable income in no time. Without further ado, let's dive into the first step of your journey, discovering which taxes you have to file as a self employed individual.
DoorDash Taxes You Have to Pay
Since DoorDash does not withhold your taxable income for you, no matter the amount you make, you have to report the amount to the IRS. You may be wondering what exact taxes you have to pay as a self employed individual. The answer varies slightly from traditional employees who file a Form W2 instead of a 1099.
As a dasher, you are considered a classified nonemployee by the IRS. You are more of a gig economy worker, which gives you added flexibility to choose your hours and the company you work for, but you also have to pay slightly more taxes.
Both employees and non employees have to pay FICA taxes, which stands for the Federal Insurance Care Act. This includes Social Security and Medicare taxes, which as of 2020, totals 15.3%. The only difference is nonemployees have to pay the full 15.3% while employees only pay half, which is 7.65%.
As a self employed dasher, you are considered both the employer and employee by the IRS, so you pay both portions. The good news is you are allowed to write off the employer portion of your self employment taxes to help lower your bill when the tax season ends. Keep reading for more information on how to write off business expenses.
After FICA taxes, you have to pay both federal and state income taxes. The exact percentages vary depending on your income level, tax bracket and state. To find out the exact tax percentages you owe, use a Form Schedule SE Self Employed. However, I must admit this form is complicated. The easiest way is to use a self employment tax calculator to figure out how much to set aside in 1099 taxes.
How Do I Find my Form 1099
If you earn more than $600 in payments during the last year from the DoorDash app, then you will receive a Form 1099-NEC Nonemployee Compensation from Payable. In the past they would send a 1099-MISC form, but the 1099-NEC is replacing that form as of the year 2020.
The way you receive your 1099-NEC depends on the delivery preference you set in your Payable account.
Payable will usually send off your 1099-NEC in the mail by January 31st for the previous tax year. If your information was incorrect or you didn't receive your form in 3-5 business days, then you can review your form online in your Payable account. Keep in mind that the payment information on your 1099-NEC does not include your cash tips. You are still required to report your cash tips.
Tax Form 1099-NEC vs 1099-K
If you are a full time dasher, you may have to wait for Payable to send you a 1099-K instead of a 1099-NEC. You will have to file a 1099-K instead of a 1099-NEC if you make more than $20,000 in sales and have 200 or more transactions. This form stands for "Payment Card and Third Party Network Transactions" meaning that Payable will send you the 1099-K since they settle the transactions of your DoorDash sales.
There is a slight exception for this rule however. If you are from Vermont or Massachusetts, then you will receive a 1099-K if you made more than $600 in total earnings from deliveries.
Now that you know what form you have to file and where you are going to get it, let's discuss how to lower your tax bill with business write offs.
What Business Write Offs Can I Deduct as a DoorDash 1099 Independent Contractor?
You have to keep a detailed record of all your business expenses if you want to write them off and lower your tax bill. This step couldn't be more important when operating your own DoorDash delivery business. Does not matter if you are a full time hustler or part time enthusiast. The best way to keep clean bookkeeping is to separate your business expenses and your personal expenses using a separate business bank account or credit card. If you want to protect yourself during an IRS audit, you'd be wise to use this tip.
However, you don't always have to open up a separate bank account. If you don't want to do that or deal with the fees from a business credit card, then you can always use a 1099 tax app that automatically separates your personal and business expenses.
Here are the most common business tax deductions for dashers:
- Your phone & accessories used for work
- Car loan payments
- Gas is deductible using the standard mileage rate
- Car maintenance
- Parking fees while working
- Tolls when picking up or delivering
- Vehicle depreciation over time
- Car insurance & registration
- DoorDash commission fees
Delivery bagsAfter you have a detailed record of all your tax deductible business expenses, you will need to fill out a Form Schedule C Profit and Loss from Business. Even if you don't have a business legal entity set up, the IRS automatically will classify you as what's called a sole proprietor. This basically means your name is the business, instead of a separate legal entity. No matter your business structure, if you are an independent contractor then you have to fill out a Schedule C if you want to lower your tax bill.
Some of these expenses are only partially deductible, especially the ones that you also use in your personal life. You are only allowed to deduct only the portion of these expenses you use for your job as a delivery driver. For example, if you use your car 30% of the time for deliveries and 70% for personal, then you can only write off 30% of all expenses related to your car.
Now that you have everything you need to know about your 1099 tax deductions, you may be wondering when your taxes are due.
When Do I Have to File my DoorDash 1099 Taxes?
If you are Dashing as a side hustle you might only have to pay taxes annually. The general rule is, if you are expecting to owe the IRS $1,000 or more when you file your taxes, then you have to file 4 times a year instead of once. These are called quarterly estimated taxes because the amount owed is usually calculated by the individual and paid quarterly. For more help on this check out our online quarterly tax estimator tool.
The quarterly estimated tax due dates are:
- Q1 - April 15th
- Q2 - June 15th
- Q3 - September 15th
- Q4 - January 15th
*Please note that these dates are subject to change due to COVID.
If you fail to pay your quarterly taxes on these due dates you open yourself up to late fees and IRS penalties. The same goes for if you underpay on your annual or quarterly taxes. Make sure to save the correct portion of your income so you can avoid these penalties.
Have a Savings Plan in Place for Your DoorDash Taxes
Whether you have to file your taxes quarterly or annually, you need to save a portion of your income for your taxes. In order to do that, you need to find out the exact dollar amounts you need to save. The quickest and easiest method is to use a 1099 tax rate calculator. Without a proper plan in place, you run the risk of spending some of the money you were supposed to pay in taxes. Run your income through this calculator at least once a month, so there are no surprises when tax season starts.
Use the Tools at Your Disposal
Overall, filing your own taxes will be easier than you think. But only if you have a proper bookkeeping system in place such as a 1099 tax app income and expenses. When you combine this with using free online calculators to help figure out the exact amount you need to pay on 1099 income, your tax filing process will become streamlined without the need for a tax professional.