Ridesharing and Taxes: What Contractors Need to Know
Share
Ridesharing has become a popular way for people to earn extra income. However, many drivers may not be aware of their tax obligations as independent contractors. As a rideshare driver, it's important to keep track of your income and expenses to ensure you're paying the right amount of taxes. Here's what you need to know about ridesharing and taxes. Income Reporting As a rideshare driver, you'll receive a 1099 form from the ridesharing company at the end of the year. This form will show how much you earned from the company during the year. You'll need to report this income on your tax return, and you may need to pay self-employment taxes on it. Expenses As an independent contractor, you can deduct certain expenses related to your ridesharing business. These may include: - Vehicle expenses: You can deduct the cost of gas, oil changes, repairs, and other expenses related to your vehicle. You can either deduct the actual expenses or use the standard mileage rate, which is 56 cents per mile for 2021. - Phone and internet expenses: If you use your phone or internet for ridesharing purposes, you can deduct a portion of these expenses. - Other expenses: You may be able to deduct other expenses related to your ridesharing business, such as parking fees, tolls, and car washes. Record Keeping To ensure you're claiming all the deductions you're entitled to, it's important to keep accurate records of your income and expenses. You should keep receipts, invoices, and other documentation to support your deductions. You may also want to use a mileage tracking app to keep track of your business mileage. Working with an Accountant If you're not familiar with tax laws and regulations, it may be helpful to work with an accountant who specializes in ridesharing taxes. An accountant can help you understand your tax obligations and ensure you're claiming all the deductions you're entitled to. They can also help you plan for estimated tax payments throughout the year. In conclusion, ridesharing can be a great way to earn extra income, but it's important to understand your tax obligations as an independent contractor. By keeping accurate records of your income and expenses and working with an accountant if necessary, you can ensure you're paying the right amount of taxes and avoiding any potential penalties or fines