Small Business Tax Policy

2017 Uber Tax Guide

Uber is a location based ride-sharing app that allows users to request a “taxi” from their smartphone. The company has grown substantially and can be found in major cities across the US. If you are a full time or part time Uber driver you can make some quick cash on your own time. However, since Uber drivers are considered independent contractors their income is reported differently for tax purposes. The following is a handy tax guide for anyone who plans on or is already driving for Uber.

Independent Contractor

The most common question most first time Uber drivers ask is, “am I self employed?”; the answer is yes. For tax purposes you are considered an independent contractor and will receive a 1099 form at the end of the year instead of a W-2.

For employees, state and federal taxes, including employee portion of social security and medicare taxes, will be withheld throughout the year and shown on a W-2. For independent contractors, the burden of withholding and remitting taxes from their pays falls on the independent contractor. This means Uber drivers could see a substantial tax liability if they are not paying estimated taxes during the year.

How is Income From Uber Taxed

For most taxpayers who are considered self employed or independent contractors they will most likely file as a sole proprietor. When you are a sole proprietor you and your business are considered one and the same. This means that you will report all your business income and expenses on Schedule C of your personal tax return.

Business income on Schedule C for self employed Uber drivers is subject to Federal and State income taxes. Also, Schedule C income will be subject to and additional self employment tax of 15.3% on the first $127,200 for 2017. For workers who receive a W-2 this rate is 7.65% for the employee and 7.65% paid by the employer. But since Uber drivers are both the employee and the business owner they will pay the combined rate of 15.3% on top of federal and state income taxes.

What Deductions Can Uber Drivers Take?

Since Uber drivers are independent contractors for tax purposes then they may be eligible to deduct qualified business expenses from their 1099 income. Since the largest expenditure is auto related the most common deduction is auto mileage. For 2017 the standard mileage rate is 53.5 cents per business mile.

Table 5-2 of IRS Publication 463 Travel, Entertainment, Gift and Car Expenses outlines the correct format to keep daily business mileage and expenses. However, there are many mobile apps like MileIQ and Triplog that allow business owners to seamlessly keep track of business miles.

Mileage Log

Alternatively, you can deduct auto expenses such as business related gas, repairs, depreciation, and lease expenses. However, it should be noted that you cannot claim both the standard mileage rate and the aforementioned auto expenses. Other auto expenses, specifically, parking fees and tolls attributable to business use may be separately deductible, whether you use the standard mileage rate or actual expenses.

Uber driver’s may also deduct half of their self employed tax on the front of their return as a deduction to arrive at adjusted gross income. This deductions is calculated last after the total self employed income is calculated.

Additionally, Uber drivers may also be eligible to deduct self employed health insurance as well as SEP contributions.

Estimated Taxes

Even though taxes are not withheld from your pay Uber drivers are responsible for paying timely estimated tax payments. Taxpayers who do no file timely estimated tax payments may be subject to stiff penalties from the IRS. To avoid these penalties taxpayers may pay upwards of 110% of last years total tax (line 63 of the 1040 for the 2016 tax year) in even estimated payments each quarter.

Tax Due Dates

Overview

Driving for Uber can be lucrative but also a nightmare when it comes time to file your 2017 tax return. Remember to keep organized records and consult your CPA. Safe driving!

 

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