What You Need To Know About Instacart 1099 Taxes (And How To Stop Overpaying Them)
Working as an Instacart 1099 independent contractor, you're a part of the emerging gig economy, along with services such as Postmates, Uber, Lyft, or Doordash. Essentially, you're self-employed and get to decide when and how much you work.
As rewarding as being an Instacart shopper can be, unlike regular employees, your taxes aren't withheld and you're responsible for filing and paying them yourself. This raises a couple of questions.
- How do I file taxes?
- How much should I pay?
- What can I deduct?
This article answers all of the above and explains how to deal with taxes with confidence.
When you work for Instacart, you’ll get a 1099 tax form by the end of January.
Instacart 1099 tax forms
By January 31st, Instacart sends all their contractors 1099- forms and files a copy to the IRS too, complying with the US tax law. Starting from 2021, the previously used 1099-misc forms are getting replaced with 1099-NEC for non-employee compensation. This form documents your taxable income from last year made through Instacart platform, usually if you are a part-time driver.
If you drove full time, earned more than $20,000, and had more than 200 transactions in 2020, you’ll usually get a 1099-K form. Vermont and Massachusetts are an exception to this rule. If you live there and made more than $600 last year as an independent contractor, you'll receive a 1099-K form, instead of the NEC form.
If I didn't receive a 1099-NEC form
If you made under $600 last year, Instacart isn't required to send you a 1099 form. Your income is still taxable and reported to the IRS, so you'll need to include it in your tax returns. When you don't receive a 1099 form, find documentation of your earnings either in the Instacart app or your bank account statements.
However, if you've made more than $600 and didn't receive a tax form, you should contact Instacart support about it.
What to do with the information from Instacart 1099?
You don't have to send your copies of the 1099 forms to the IRS, since Instacart already sent one. The ones you receive are for you to keep in your financial records. To file your income taxes from Instacart, you’ll have to fill out Schedule C, Schedule SE, and your 1040 with the information from your 1099 forms.
Use a separate schedule C and Schedule SE for Instacart, if you do other gigs
If you do other gigs on the side, such as Uber delivery, other services, or independent contracting where you receive 1099 forms, don’t mix it up with your other tax returns. You’ll have to file separate schedule C and schedule SE for each of the individual services.
On Schedule C, you need to fill out how much you’ve earned, subtract your deductions, and find out how much you actually need to pay in taxes.
How Much Should I Pay And What Can I Deduct?
As a worker in the gig economy, you play by the same rules as independent contractors, freelancers, and other gig workers. You have to pay federal and state taxes and the self-employment tax. As painful as it is, your tips are taxable income too, so you have to pay taxes on them too. But there’s a big advantage that can the higher taxes worth it.
How much should I set aside for taxes?
As a rule of thumb, set aside 30% of your net income (income after expenses). This should cover your federal and state taxes.
Gig workers and independent contractors are considered as business entities and employees at the same time by the IRS. This means you’ll have to pay both the employers and the employees part of FICA taxes, better known as the self-employment tax of 15.3%.
On top of that, you should still add your state taxes, according to your income tax bracket and marital status. You can calculate this by using our 1099 tax calculator.
If you expect to owe more than $1000 in taxes per year, you’ll have to pay estimated taxes on a quarterly basis. Missing the payments will result in fees and penalties with interests. If you end up paying more than you owed by the end of the year, you’ll get your money back. Use our quarterly tax calculator, to calculate your quarterly taxes. The due dates are:
- Q1 - April 15
- Q2 - June 15
- Q3 - September 15
- Q4 - January 15th
Note that due to covid-19, the quarterly payment date can get pushed back. See trusted sources like the IRS website for updates about it.
One of the perks of being self-employed is that you can deduct all your business expenses from your business income before you pay taxes. And you should, or else you are leaving money on the table. You can deduct:
- Car and mileage expenses. Working as an Instacart shopper, you’ll drive a lot less than for Uber or Lyft, so tracking your mileage and deducting it is important.
- Your bicycle, if you live in an urban area and use it for delivery service.
- Partially your cell phone bill, because you’re using your phone a lot for work. If you buy a dedicated charger to use in your car for work you can write it off too.
- Office supplies needed for work and potential advertising costs. As long as these expenses relate to your business, they can be deducted.
Check out this article for a list of 1099 write-offs.
You can deduct any expenses necessary for your work and there are more deductions available to you might be thinking. If you wish to simplify your write-off tracking, use Keeper Tax to monitor your expenses and find the write-offs.
If you're new to the gig economy, dealing with taxes can be complicated. It is common for gig workers and independent contractors to make tax mistakes and get penalized for it. It sucks but it can be avoided. If you’re in doubt about something, don’t hesitate to contact a tax professional. Some professionals offer free service and can save you from a lot of trouble.
To help you keep your records clean, find the write-offs you’ve been missing, Keeper Tax can monitor your account for tax deductions automatically and help you file your taxes all in one place.