The process of figuring out your DoorDash 1099 taxes can feel overwhelming, from expense tracking to knowing when your quarterly taxes are due. IRS will come knocking if you don't know what to do.
Whether you work as a DoorDash driver part-time or full-time, you need to file your taxes correctly. In this guide, you'll learn all about taxes for Doordash - from when and how to file them, to what deductions you're owed to lower your tax bill.
Do I owe taxes working for Doordash?
Yes - Just like everyone else, you'll need to pay taxes. If you earned more than $600 while working for DoorDash, you are required to pay taxes.
It doesn't apply only to DoorDash employees. To compensate for lost income, you may have taken on some side jobs. That money you earned will be taxed. You will have to pay income tax on that money at your regular income tax rate.
You will also need to pay a self-employment tax. In this case, it's a 15.3% tax that covers what you owe for Social Security and Medicare. Traditional employees are responsible for splitting these costs with their employer. But when it's just you, it's your responsibility. Fortunately, there is some good news as well. Your annual tax return may allow you to deduct a portion of that self-employment tax.
It's important to know that Doordash drivers are independent contractors, not employees. No taxes are withheld from your earnings. As such, you'll file taxes as an independent business owner when tax season rolls around.
Does Doordash take taxes out of my paycheck?
The answer is no. As an independent contractor, you are responsible for paying your taxes.
DoorDash is an independent contractor, which means it does not automatically withhold federal or state income taxes. You will have to calculate and pay the taxes yourself. However, there are different ways to go about this.
You will have to do some calculations once you have determined how much you earned. Following that, you will want to determine whether you qualify for any tax deductions. Don't worry about getting it perfect at this stage. At this point, you have options in which to choose.
How much should I set aside for taxes on Doordash?
In order to pay your taxes, you must set aside income throughout the year to pay your 1099.
The Dasher app does not contain a Doordash tax calculator. You can determine your taxable income by subtracting any deductions from the money you earn and by determining your filing status (single, married filing jointly, married filing separately, head of household, and widow(er) with dependent children).
Generally, you should set aside 30-40% of your income to cover both federal and state taxes.
Whether you file your taxes quarterly or annually, you need to set aside a portion of your income for your taxes. For this, you must know the exact dollar amounts you need to save. Using a 1099 tax rate calculator is the quickest and easiest method.
A lack of a proper plan could lead you to spend some of the money you are supposed to pay in taxes. If you run this calculator monthly, you'll have no surprises come tax time.
Doordash 1099 Forms
During tax season, tax forms are released with all the relevant information from the previous year. If you earned at least $600 through dashing in the previous year, you will receive a 1099-NEC.
You will be provided with a 1099-NEC form by Doordash once you start working with them. You will receive your 1099 form by the end of January.
Box 7 "Nonemployee Compensation" will be the most important box to fill out on this form. This reports your total Doordash earnings last year. You should report your total doordash earnings first.
If you are...
Working with an accountant of CPA
Using tax software
You'll enter your earnings total and any deductions you wish to take, and the software will calculate your taxable income for you.
Doing your own taxes
You will use your Nonemployee Compensation number on your Schedule C to report 'Gross Earnings' on Line 1 of your Schedule C. You will also note which expenses you wish to claim as deductions on the Schedule C. Next, you will enter your total business profit on the Schedule SE which will determine the amount of taxes payable on your independent income.
1099-NEC vs 1099-K
If you make more than $20,000 in sales and have 200 or more transactions, you will have to file a 1099-K instead of a 1099-NEC.
Payable may send you a 1099-K rather than a 1099-NEC if you are a full-time dasher. Payable will send you the 1099-K because they handle the transactions related to your DoorDash sales. The form stands for "Payment Card and Third Party Network Transactions."
However, there is a slight exception to this rule. If you made more than $600 in total earnings from deliveries in Vermont or Massachusetts, you will receive a 1099-K.
How do I find my form 1099?
In your Payable account, you can choose how you want to receive your 1099.
For the previous tax year, Payable usually sends your 1099 via mail by January 31st. You can review your form online in your Payable account if your information was incorrect or you didn't receive your form within 3-5 business days.
Do you pay taxes on Doordash tips?
Yes - Cash and non-cash tips are both taxed by the IRS. Federal income taxes apply to Doordash tips unless their total amounts are below $20.
Your cash tips are not included in the information on the 1099-NEC you receive from Doordash. However, you still need to report them.
If you receive a tip as an employee, you are obligated to pay taxes on this additional income.
Helpful Resource: Are tips taxable?
Doordash Tax Deductions
Independent contractors have the advantage of being able to deduct lots of costs (such as mileage, hot bags, etc.) they incur in the course of performing their work.
The more tax deductions you take, the fewer taxes you pay. Many Dashers pay less tax than they would as employees because they maximize their tax deductions.
Independent contractors can deduct their non-commuting business mileage. Included are miles you drive to your first delivery pickup, between deliveries, and back home at the end of your day.
However, there's a slight catch - you can't deduct mileage and gas at the same time. According to the IRS, the standard mileage deduction (56 cents a mile in 2021) accounts for gas, car payments, maintenance, insurance, and depreciation. You can think of this as a large deduction for all of the expenses incurred by using your car.
Phone & Service
In order to get through the day, every on-demand worker needs a good phone, accessories, and plenty of data. A portion of these expenses can be deducted if they are linked to work.
A car holder, car charger, and any other accessories that you need for your delivery job are deductible.
The expenses can be deducted, however, only as a percentage of the business use. In other words, if you use your cell phone for work 50% of the time, and for personal reasons 50% of the time, you are eligible to deduct 50% of the cost.
Knowing how much of your phone usage is from work can be challenging. Take a look at your phone records for a typical month, see how much of your data and calls occur during work hours, and apply the average to the rest of the year (or, better yet, review them every month).
Hot Bags & Blankets + Courier backpacks
Do you use insulated bags and blankets to keep food warm? They are deductible as "ordinary and necessary" business expenses.
Here, too, the "percentage of business use" rule applies. In general, the IRS doesn't like it when business supplies are used for personal purposes. Therefore, if you need a hot bag outside of work, you should have another bag for personal use.
If you pay tolls while working, they are deductible. However, make sure you haven't been reimbursed for them already.
Working in the city sometimes means paying for parking. Those expenses are tax-deductible.
Please note that traffic violations, speeding tickets, and parking tickets are not deductible because they are incurred due to improper driving and not directly due to work.
Expenses for vehicle inspections and background checks associated with your delivery job are deductible.
Tax deductions are available for AAA and other roadside assistance programs.
Take note, however, of how much of this expense is being used for work. You should only deduct the portion of the expenses that are related to your work if, for example, you use your subscription twice a year for work and once for personal reasons. Calculate the business/non-business mileage ratio for your car using your business mileage log, then apply that ratio to calculate the AAA deductible portion.
When you're self-employed and meet certain requirements, the IRS allows you to deduct your health insurance premiums.
How to Pay Doordash Taxes
In spite of not getting a W-2, your income tax filing process won't differ much from those with traditional employment. DoorDash will issue a 1099, which will list the amount of pay you received for deliveries.
Because most Dashers operate as sole proprietors, there is no legal structure to their work like there is with an LLC or S-corp. This means they will still file a personal tax return. Dashers can deduct their business expenses from their personal tax return through Schedule C on Form 1040.
You can, therefore, often file as usual. By doing this, you will pay your taxes owed before April 15. However, you may want to carefully consider this option. The result of zero withholding is that you will have a big tax bill due on Tax Day. In the event you cannot pay the full amount, you will be penalized and owed interest.
Estimated Tax Payments
Alternatively, you can make quarterly estimated tax payments directly to the IRS. If you do this, you could avoid getting a surprise tax bill and possibly avoid paying penalties. IRS doesn't want you to end up with a huge bill you can't pay. The IRS may suggest quarterly payments if you expect to owe more than $1,000 in taxes this year. Self-employed people whose income exceeds a certain amount are sometimes required to pay quarterly taxes.
Estimated Tax Payment Due Dates
Taxes for the first quarter are due on April 15th. Income earned in January, February, and March must be reported by April 15th.
By June 17th, second-quarter taxes must be paid. These taxes cover April and May earnings.
Due September 16th are Estimated Tax Payments for June, July, and August income.
The estimated tax payment for September, October, November, and December is due January 15th.
You should set aside 25-30% of your paycheck every month for taxes. Taxes from your side hustle aren't withheld, so you should be prepared. It's better to overestimate than underestimate. Tax deadlines are a good time to plan ahead rather than scramble.
Helpful Resource: Paying taxes on a side hustle
If you are an independent contractor, it can be stressful and time-consuming to file taxes, but if you have a clear understanding of what items are deductible, you'll have an easier time filing.
Need help with Filing Doordash taxes?
DoorDash recommends - and we agree - that you go to an accountant if you are a DoorDash independent contractor. A CPA can give you tax advice as well as file your taxes on your behalf.
By hiring a tax professional, you are guaranteed to receive all the deductions you are entitled to.
Part-time DoorDash drivers who also hold a full-time job may find it easier to have a CPA file their taxes, since they'll handle a W-2, a 1099-NEC, and deductions from their part-time DoorDash jobs.
If you are a DoorDash driver and face an audit, your CPA will defend you and might be able to prevent an audit.
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