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Filing your tax return on your own can be a taxing task. If you’re a delivery driver, then you need to know the taxes you’ve to pay, the income form you need to fill up, and what kind of expenses you can write off. Here’s a short useful guide to learn how you can handle your taxes on your own as a delivery driver. ~ Ed.
Being self-employed, either as a freelancer or a delivery driver, has numerous perks over being regularly employed. Perhaps the best one is that you get to be your boss and work within flexible hours, allowing you to cater to other important matters that you need to attend to.
However, along with its perks come some inconveniences, such as having to file your tax return on your own. In line with this, below are some of the ways on how you will be able to handle your taxes properly.
Know the Taxes That You Need to Pay
As a delivery driver who is an independent contractor, one of the primary things that you need to take note of is the taxes that you need to settle.
The not so good news is that you need to pay a bit more compared to regularly employed delivery drivers because the IRS considers you both as an employer and employee at the same time.
In this case, one of the taxes that you need to pay is the Federal Insurance Care Act (FICA) tax which already includes your Social Security and Medicare taxes. This is generally 15.3% of your overall gross income.
Aside from the FICA tax, you also need to settle federal and state taxes that vary depending on several factors such as your income level, tax bracket, as well as the state that you are in.
To figure out an estimated amount of the tax that you need to pay, you can leverage online self-employment tax calculators. In this way, you will be able to seamlessly figure out the amount of your DoorDash 1099 taxes as a self-employed delivery driver beforehand.
There is also the option for you to use the Form Schedule SE, but for non-accountants, this form can be quite too complex to understand.
Find Your Income Form
As soon as you have an idea of the different types of taxes that you need to settle, the next thing that you need to do is to identify the type of income form that you need to fill out.
In case you are a full-time delivery driver, and your earnings exceeded $20000 in the previous year, along with more than 200 transactions, then Payable will send you a 1099-K form to complete.
On the other hand, if you are a part-timer earning over $600 in payments during the previous tax year, then Payable will send you a 1099-NEC tax form.
In this case, make sure that your address and other details in your Payable account are updated and accurate. The reason behind this is that they will mail the forms you need to fill out to the address that you have stated in your account.
Keep Track of Your Expenses
Since you need to file your taxes on your own, it follows that you need to monitor your cash flow, which includes both your income and expenses as a delivery rider. This entails the need for you to keep a paper trail of your receipts which are organized properly.
As much as possible, keep your personal and business expenses separate for an effortless filing of tax dues later on.
Learn Business Write-Offs
There are many types of business expenses that you can write off when filing your tax return. Know more about them.
Mileage, Parking, and Toll
As an independent contractor, you are eligible in deducting various expenses from your tax dues. Some of the most common ones include mileage, parking, and tolls, mobile phone, as well as supplies, commissions, and fees.
Thus, you need to keep track of all the miles that you used your vehicle for business purposes. This includes the mileage you used up in making deliveries, picking up supplies, or running any other business-related errands. Aside from this, all the parking and toll fees that you have incurred while doing business can also be deducted from your tax dues.
In case you have a separate phone that you use for delivery purposes, then you can deduct a hundred percent of the cost of your phone and monthly data plan from your tax dues. Conversely, if you use a single phone for both personal and business purposes, then you need to segregate your personal and business mobile phone expenses because you can only deduct the latter from your tax dues.
You can also deduct the amount that you have spent on purchasing hot bags or blankets to keep your food deliveries warm. Alongside this, you can also deduct your expenses in purchasing courier backpacks and dashboard mounting systems from your tax dues. All these are considered supplies that you need to keep your delivery driving business seamless and efficient.
Some other common expenses that you can deduct from your tax dues include roadside assistance as well as the cost of your bike and accessories. In this case, you can deduct the annual membership fee of your roadside assistance plan based on the miles that you have used for service purposes.
In the same manner, if you are using a bike instead of a car, then you can also write off the expenses that you have incurred for the repair and maintenance of your bike. Finally, you can also write off the fees you pay to the platform of a delivery app in case you are leveraging one.
Take Note of the Deadlines
Make sure that you are on top of the due dates when it comes to your tax settlement. As an independent contractor, you need to file your tax return every quarter, which takes place on the fifteenth day in January, April, June, and September. In case you fail to make the necessary payments on or before these due dates, then you may need to settle late payment penalties.
Wrapping It Up
It can be quite lucrative to be self-employed because of the various benefits that you get from it. However, it can also be equally challenging, particularly when it comes to filing your tax returns.
Rest assured that as an independent contractor, you just need to take note of the tips listed above, and you will be able to settle your taxes effortlessly.
Over to you
Are you a delivery driver? Please share your experiences and tips on how to file your tax returns on your own in the comments below.