What Rideshare Drivers Need To Know About Taxes

As a rideshare driver, it's essential to understand the tax implications of your earnings. Our drivers must know their tax obligations and face penalties and fines. We have created this comprehensive guide to help you navigate the complexities of taxes as a rideshare driver. From understanding what income is taxable to maximizing your deductions, Tax Relief R Us is here to provide you with the knowledge and expertise you need to stay compliant and minimize your tax burden. Read on to learn everything you need about taxes and rideshare driving.

How Do I Classify Each Deduction?

You can claim various deductions to reduce your taxable income as a rideshare driver. Here are some standard deductions you might be able to claim:

1. Vehicle expenses: This includes the cost of gas, oil changes, repairs, maintenance, and depreciation.

2. Insurance: You can deduct the cost of your car insurance and any other insurance policies you have for your business.

3. Rideshare fees: You can deduct the fees you pay to your rideshare company, such as Uber or Lyft.

4. Other expenses: This includes snacks and water you provide for your passengers and any parking fees or tolls you pay while working.

How Do I Record a Depreciating Asset?

As a rideshare driver, if you're filing your taxes with software, you must report that you have a "depreciating asset" for your business. This can usually be found in any filing software's "business expenses" section. On the other hand, if you're filing taxes by hand, you'll need to fill out Form 4562 - Depreciation and Amortization.

When you report your business assets, such as work-only cell phones or dashcams, you must either depreciate the asset's cost over its useful life or take the Section 179 deduction. The latter allows you to deduct the entire asset cost this year, provided the asset is used for work over 50% of the time.

The depreciation (or deduction) method you choose should depend on what would be most helpful for your business this year. Would you rather be able to deduct the entire asset cost this year or deduct a portion of it for multiple years and plan for income taxes in future years?

What Kind of Documentation Do I Need for My deductions?

While you won’t submit your expense documentation with your tax return, you will need it to:

a. Know how much you can deduct from your business income and

b. Back up those deductions during an audit.

A good way to think about claiming tax deductions is that the more documentation, the better. Your documentation should provide the full context of your purchases to the IRS, should you ever be audited. The details that the IRS would want to know include:

· Time and date of the expense

· Description and business purpose of the expense

· Name of the vendor

· Amount of the expense

Retaining your documentation for at least three years after the tax year ends is advisable. The IRS can review your tax returns and calculate any further taxes owed for up to three years after filing. Nevertheless, if the IRS concludes that you have left out a substantial amount of revenue from your return, it may take up to six years to complete a tax assessment.

What If I Didn’t Keep My Receipts for Business Expenses?

If you didn't keep your receipts for business expenses, you could still claim them as a tax deduction. However, you will need to prove the expenses were for business purposes. One way to do this is by creating a log of your expenses, including the date, amount, and purpose of each expense. You can also use credit cards or bank statements as proof of expenses. However, it's always best to keep your receipts, as they provide the most detailed and accurate record of your expenses.

Are There Business Expenses That Are Deductible?

Absolutely! Our Rideshare Deduction Guide contains a comprehensive list of business expenses that are considered "ordinary and necessary" for running a rideshare business.

A few of them include:

· Water bottles that you buy for passengers

· A portion of your cell phone bill

· Car cleaning supplies

Just be sure to only deduct the portion of these expenses that are for your business, not for personal use. For example, if you use your cell phone for work 50 percent of the time, you would only deduct 50 percent of your phone costs.

What About Mileage?

If you use your car for work-related purposes, you can deduct the expenses associated with it, such as gas, maintenance, car payments, and several others. Alternatively, you can remove a standard amount for every business mile driven. For late 2022, the standard mileage rate was 62.5 cents per mile, which increased to 65.5 cents for 2023.

If you have yet to keep track of your business mileage, there's no need to worry. If you're driving for services like Uber or Lyft, they track all your on-trip mileage (when you have a passenger in the car), so you can at least deduct this amount. Here's how you can fill in the blanks in your mileage log.

What About Airport/City Fees?

As an Uber driver, you won't have to pay taxes on the fees or commissions you receive from Uber. However, it's important to note that these fees and commissions are still included in the gross income reported on your Uber 1099-K. When it's time to file your taxes, you must deduct these fees as a business expense. If you're using tax filing software, you'll be prompted to enter these fees as "commissions and fees." Alternatively, if you're filing your taxes by hand, you can deduct them on Line 10 - Commissions and Fees.

Conclusion

Tax Relief R Us can be a complex subject, especially for rideshare drivers. However, rideshare drivers must clearly understand their tax obligations and how to maximize their tax deductions. This article has outlined important information regarding taxes for rideshare drivers and provided practical tips for managing their tax obligations. To ensure you are taking full advantage of all available tax relief options and to stay informed about the latest developments in tax regulations, it is recommended that you consult with a professional tax advisor or subscribe to our services.

If you require assistance with payment plan negotiations or other tax resolution issues, speak with a CPA or a tax attorney.

Call TAX RELIEF R US at (844) 829-2292 for assistance with tax issues associated with operating an Uber or Lyft vehicle. We can take the time to hear your worries and work with you to develop the finest tax resolution plan possible.