Making Sense of Lyft Tax Documents: How To Do Your Rideshare Taxes Painlessly

by
John Henderson, EA
Updated 
September 21, 2022
April 1, 2022
Icon chek
Reviewed by
Sarah York, EA

For most of the year, being a self-employed Lyft driver is so much better than being trapped in a monotonous 9 to 5 — until tax day rolls around. Suddenly, working for someone else feels a little more desirable. Wouldn’t it be nice if filing your taxes started and ended with a simple W-2? 

Dealing with Lyft tax documents can be tough, but it comes with the territory of being an independent contractor. You can’t just focus on snagging every available ride — you also have to track expenses and make quarterly estimated payments. And what about those Lyft 1099 forms?

In this article, we make understanding Lyft taxes easier. Keep reading to learn about the key documents you need to file — and what to do with them.

Contents

What taxes do you pay as a Lyft driver?

Lyft and Uber drivers are technically considered business owners. That means you’re responsible for two types of taxes on your return: self-employment taxes and income taxes.

Self-employment taxes

Self-employment taxes are, well, taxes paid by the self-employed.

These taxes cover freelancers’, independent contractors’, and business owners’ contributions to Social Security and Medicare. Traditional employees pay them, but they work a little differently for self-employed people — and cost a lot more.

In traditional jobs, employees pay half of these Social Security and Medicare taxes, while their employers pay the other half, to the tune of 7.65% each.

As self-employed people, though, rideshare drivers have to pay both halves. That leaves you with a total self-employment tax rate of 15.3%. (For the 2021 tax year, the Social Security portion applies to your first $142,800 of net income, which is your gross earnings after deducting all allowable expenses. The Medicare portion has no ceiling, but it’s much smaller at only 2.9%)

Whether it’s your first year driving for Lyft or your third, the sticker shock you feel when seeing your final tax bill never really fades. To put that number in perspective earlier, use a self-employed tax calculator to estimate how much you'll owe in taxes.

{write_off_block}

Income taxes

As an independent contractor, you’re still on the hook for regular income taxes — self-employment taxes don’t cover this. The amount you pay depends on how much money you make during the year from all your income sources. 

Full-time employees usually have these taxes withheld from their paycheck, but they’re not withheld for Lyft independent contractors. That's right — you have to remit your own taxes.

Anyone who’s filed a standard W-2 will tell you that income taxes add up to a hefty amount. When they’re not withheld from you, you’ll have to stay on top of your budgeting. To ensure you can cover these expenses, consider setting aside 25% to 30% of your income during the year.

The Lyft tax documents you should know

Lyft drivers will receive a few tax documents. Each of these details a different aspect of your ridesharing business.

These forms will arrive by late January.

Form 1099-K: For your earnings from rides

The main tax form for Lyft drivers is Form 1099-K. This reports business income paid through credit card companies and third-party payment processors – think Stripe, PayPal, Cash App, and Venmo.

These days, Lyft drivers will get a 1099-K form as long as they earned more than $600 from rides. This wasn’t always the case, but 1099-K rules changed in 2022. (Before, 1099-Ks were only issued to drivers who earned at least  $20,000 from rides and had more than 200 digital transactions.)

You should get a 1099-K from every company that processed transactions for you, so if you drove for both Lyft and Uber, you’ll get two forms. Keep an eye out. The forms are due on January 31st, which means they’ll usually arrive by early February.  

Form 1099-NEC: For your bonus and referral payments

If you received at least $600 for activities other than driving during the tax year, you’ll receive a 1099-NEC.

For most Lyft drivers, these “other activities” are bonus payments you earned by completing rides and unlocking tiers. This includes both referral bonuses and streak bonuses.

The 1099-NEC form for 2021 serves the same purpose as Form 1099-MISC in prior years.

Lyft Annual Summary: For an overview of your Lyft income

As part of Lyft’s efforts to make tracking receipts easier, you’ll get access to an annual summary or tax information tab on the Lyft website.

This tax summary isn’t technically a required tax document, but it's worth reviewing and referencing as you file. This summary tracks: 

  • 🚘  Ride payments: The total amount passengers paid for the rides you provided, including payments, tips, reimbursements, cancellation fees, platform, and third-party fees.
  • 📱  Non-Ride earnings: All earnings from activities other than rides, like referral bonuses, streak bonuses, manual bonuses, ride challenges, earnings guarantees, and personal power zones.
  • 💸  Expenses: The fees and tolls you paid over the course of your work as a Lyft driver. These include platform fees, service fees, third-party fees, Express Pay fees, Express Drive rental fees, tolls, and wage garnishments. 

B Notice: If your information was wrong

If there was an issue with the name or TIN (Taxpayer ID Number) you gave Lyft in a previous year, you’ll receive a B Notice from the IRS. Sometimes, it’s as simple as a typo on the info you provided. 

Don’t panic if you get a B Notice. It’s just important to notify Lyft immediately. Fortunately, the B-Notice provides clear instructions for you to correct it.

Correcting your info after getting a B Notice

Simply contact Lyft to provide the corrected information, so they can submit it to the IRS.

Don’t wait on this. If Lyft doesn’t receive the requested information within 15 days, they’re required by the IRS to withhold 24% of your earnings. These get sent directly to the IRS in what’s called “backup withholding.”

To make matters worse, Lyft doesn’t allow you to use Express Pay or Lyft Direct if there is backup withholding on your account.

How to use your Lyft tax documents

If reading your 1099s feels like trying to solve a crossword puzzle before guzzling your first cup of coffee, you’re not alone. Thankfully, they’re simpler than they look. The Lyft 1099 forms have many boxes, but you only need to concern yourself with two:

  • Box 1a on 1099-K
  • Box 1 on 1099-NEC

These report your gross earnings in each category — earnings from rides on the 1099-K and bonus earnings on the 1099-NEC.

Important note: The amount in Box 1a of 1099-K will be larger than what you actually got paid. That’s because it shows the total amount your customers paid before Lyft took their cut. (Luckily, you can deduct these Lyft fees as a business expense.)

{filing_upsell_block}

Reporting your Lyft income on your taxes

To report your self-employment income, grab your Lyft Annual Summary again. This details your earnings and some of your business expenses. Because it has these all in one place, adding up your income with your Lyft Annual Summary is easier than using your 1099 forms. 

Next, calculate your ridesharing earnings on Schedule C, Profit or Loss from Business. For more detailed instructions, check out our guide on how to fill out Schedule C. But in the meantime, here are the basics you need to know:

  1. Add up your driving and non-driving income and put it on line 1.
  2. Subtract your business expenses from your income to get your “Net profit or (loss).” Enter that figure on line 31.
  3. Enter the Lyft commission on line 10, “Commissions and fees.”

From there, you’ll reference your completed Schedule C to report your business profit to the IRS in two places:

  • Form 1040: Your personal tax form, which details income earned from all sources
  • Schedule SE: For calculating self-employment taxes, if your total business income was at least $400

The Lyft driver tax write-offs you can claim

Write-offs can lower your taxable income and provide some necessary relief when it’s time to send the IRS your cut. For example, as a Lyft driver, you can snag tax deductions that help you recoup some of that wear and tear on your car. 

The more eligible write-offs you can claim, the lower your taxable income will be.

Car expenses

Obviously, car expenses are a big part of your expenses as a Lyft driver. You can deduct these in two ways:

  • 🛣️ Using the standard mileage deduction
  • 💰 Deducting a portion of all your actual car expenses

Using the actual expenses method,  you’d calculate the actual costs of running your vehicle, then multiply that by your business-use percentage. That’s the percentage of time you're using your car for rideshare driving, instead of for personal errands.

The expenses you can write off using this method include:

The standard mileage deduction is an alternative approach. Using this method, you’d write off a flat rate for every mile you drive for work. For the 2022 tax year, this rate is $0.585 for miles driven from January to June, and $0.625 for miles driven from July and onward. (The amount usually changes every year, not every six months. But the IRS wanted to do something to acknowledge the rising gas prices!)

Weigh your options here. If you do a lot of rideshare (or delivery) driving, then you’ll probably save more on your taxes by tracking your miles. But if your Lyft business is more of a side gig outside of your 9-to-5, then the actual expenses method might be your better bet. 

Afraid of missing write-offs? Give Keeper Tax a try. Our app scans your purchases for business expenses and writes them off for you, so you can spend less time updating spreadsheets and scanning fuel receipts.

{upsell_block}

Expenses for improving your passenger experience

Your driver rating is key to building and maintaining a successful business. That’s why you can write off anything you spend to keep your car looking clean — or to make the ride more enjoyable for your customers.

Common tax-deductible expenses that fall into this category include:

  • 🧽  Going to the car wash
  • 🥨  Providing snacks for passengers
  • 🔌  Offering a phone charger
  • 🩹  Having a first aid kit in the vehicle
  • ➕  And more

Other expenses

When you think you’ve captured all of your expenses, think again. A sizeable chunk of your write-offs will be miscellaneous —  but essential — expenses you can use to reduce your tax liability. 

For example, your cellphone bill is likely sky-high if you’re online running long shifts. You can either deduct a portion of your cell phone bill, or have a separate cell phone used just for business purposes.

Don’t forget your phone accessories either. The mount you bought for safer driving? That’s 100% deductible. 

If you purchased a roadside assistance plan, such as AAA, you can deduct a percentage of your annual membership, based on the percentage of miles you drove for business purposes.

Keep in mind: Making a case for miscellaneous business expenses can be tricky if you also use these in your personal life too. (Looking at you, Spotify Premium.)

If you’re wondering what counts, or how to split up these mixed expenses, try Keeper Tax. The app connects you with a bookkeeper who can field these tax questions and give you an answer tailored to your situation. 

When to pay your taxes as a Lyft driver

Part of knowing how to pay your taxes is knowing when to pay them.

Many self-employed workers, including rideshare drivers, have the pleasure of enjoying tax day four times a year. If you expect to owe the IRS $1,000 or more in taxes, then you have to pay these estimated quarterly taxes.

The estimated tax payment due dates are:

  • 🌷 1st Quarter - April 15
  • 🏖️  2nd Quarter - June 15
  • 🍁  3rd Quarter - September 15
  • 🌲  4th Quarter - January 15

If you should be making quarterly payments, but don't, a hefty amount of interest will get added to your original tax bill. To avoid this, you’ll need to pay at least  90% of your total tax bill. 

The easiest way to make quarterly taxes less painful is to plan ahead. Figure out whether they’re required for you, then save enough money to make the payments throughout the year. 

To really be prepared, you can estimate your quarterly tax payments early and send them in before the due dates. That way, no deadline will ever catch you off-guard again.

John Henderson, EA

John Henderson, EA

websitetwitter-link

John Henderson is the founder and sole proprietor of Barn Cat Consulting, LLC – a Hoisington, KS based business specializing in tax accountancy, tax preparation and IRS representation while also providing payroll and HR solutions. As an Enrolled Agent and QuickBooks ProAdvisor, John has helped individuals, families, businesses, and non profit organizations navigate the complex US Tax Code

Find write-offs.
File taxes.

Keeper Tax helps independent contractors and freelancers discover tax deductions and file taxes.

Try for free →
Find write-offs. File taxes.

Tax filing for freelancers and side hustlers

Most tax software isn't built for you. Ours is. We know every form you need and every deduction you can take to pay less this year.

Get started→
Yearly

Free Tool

What tax write-offs can I claim?

I am ...
Freelance designer
Uber / Lyft driver
Text Link
Freelance designer
Freelance designer
See write-offs
Company Contact Country
Alfreds Futterkiste Maria Anders Germany
Centro comercial Moctezuma Francisco Chang Mexico
Ernst Handel Roland Mendel Austria

At Keeper Tax, we’re on a mission to help freelancers overcome the complexity of their taxes. That sometimes leads us to generalize tax advice. Please email support@keepertax.com if you have questions.