What Kind Of Taxes Do You Have To Pay When Driving For Food Delivery App Services

Filing Tax Returns for Delivery Drivers: Tips and Advice

Updated for Tax Year 2021 / December 17, 2021 11:03 AM

OVERVIEW

Whether you're just starting out or have been in the field for a while, being a delivery driver comes with its own nuances when it's time to file your taxes. Here are four steps to help guide you through the process and help ensure accuracy while maximizing your return.

For information on the third coronavirus relief package, please visit our "American Rescue Plan: What Does it Mean for You and a Third Stimulus Check" blog post.

filing-tax-returns-for-delivery-drivers-tips-and-advice_L0UbcGiKQ.jpg

With the growth in the on-demand economy, being a delivery driver can be a great way to make money, either full time or as a side gig. Whether you work for companies like Amazon, UPS or a new app-based platform, being a delivery driver means understanding key facts so you can file your taxes accurately and on-time.

Here's what you should know about filing tax returns for delivery drivers.

Step 1: Employee vs. independent contractor

How you report your income and whether you can deduct expenses depends on whether you're an employee or an independent contractor.

Employees generally receive regular paychecks usually with income, Social Security and Medicare taxes withheld from their wages. At year-end, they typically receive a Form W-2 showing the income they earned for the year and total tax withheld.
Independent contractors are typically considered self-employed. The companies that hire them don't usually withhold income or payroll taxes from their payments. At the end of the year, they typically receive a Form 1099-NEC showing total earnings for the year.

If you're not sure whether you're an employee or a contract worker, talk to your employer.

Step 2: Select the right tax forms

Whether you're an independent contractor or an employee, you'll use Form 1040 to file your tax return as a delivery driver.

If you're an employee, the wages from your W-2 go on line 1 of Form 1040, and the federal income taxes your employer withheld go on line 17.
If you use tax filing software like TurboTax to prepare your tax return, the software will automatically enter your income on the correct lines.

Independent contractors have to attach some additional schedules to Form 1040.

You'll typically use Schedule C to report the income you earned as a delivery driver.
You'll use Schedule SE to calculate your self-employment tax.

Again, if you use TurboTax to prepare your return, the software will ask you a series of questions and fill out the proper forms for you.

Step 3: Take advantage of tax write-offs

If you're an employee, you don't have a lot of opportunities for tax write-offs related to your delivery driver income. Your employer might cover or reimburse you for work-related expenses.

Independent contractors, however, can typically deduct work-related expenses on Schedule C. Here are some common expenses you may be able to deduct:

Mileage. It's essential to keep track of all of the miles you drove for business. If you keep careful records, you can usually deduct the miles you drive making deliveries as well as miles for picking up supplies and running business-related errands. For 2021 tax returns, you can use the standard mileage rate to take a deduction of $0.56 per business mile. Alternately, you can use the actual expense method to deduct the business portion of costs like gas, repairs and maintenance, auto insurance, registration and car loan interest or lease payments.
Parking and tolls. In addition to your mileage, you can also deduct parking fees and tolls related to your work.
Mobile phone. Do you have a separate phone that you use just for delivery driving? If so, you can deduct 100% of the cost of the phone and your monthly data plan. However, if you use your phone for both work and personal needs, you'll need to split your deduction between business and personal use.
Supplies. Many delivery drivers purchase hot bags and blankets for keeping food deliveries warm, courier backpacks, phone chargers and dashboard mounting systems and other supplies. Supplies like these are generally a deductible expense.
Roadside assistance. Did you get a roadside assistance plan? You can deduct a percentage of your annual membership fee based on the percentage of miles you drive for work.
Commissions and fees. If you drive for a delivery app and they charge a commission, you can typically deduct the fees paid to the platform.
Bike and accessories. If you deliver by bike instead of car, generally you can write off the cost of repairs as well as any necessary accessories.

Step 4: Make estimated tax payments

As an independent contractor, you're usually responsible for paying your own taxes. You typically don't have an employer to withhold them for you. And just as an employer withholds a portion of each paycheck, the IRS expects you to pay taxes as you earn money throughout the year.

If you expect to owe taxes of $1,000 or more, you're usually required to make quarterly estimated tax payments.
Those payments are generally due on April 15, June 15, September 15 and January 15 of the following tax year or the next business day due to a weekend or holiday.
If you skip making a payment or pay late, you may have to pay a penalty when you file your tax return.

Tips for Filing Tax Returns for Delivery Drivers

If all of this seems like a lot of work, don't worry. You can use QuickBooks Self-Employed to track your income and expenses and figure out your estimated tax payments. The software will handle the math for you. It can even walk you through making an electronic payment to the IRS.

TurboTax Self-Employed will ask you simple questions about your life and help you fill out all the right forms. Perfect for independent contractors and small businesses. We'll search over 500 tax deductions to get you every dollar you deserve and help you uncover industry-specific deductions.

Perfect for independent contractors and small businesses

TurboTax Self-Employed searches over 500 tax deductions to get you every dollar you deserve.

TaxCaster Tax
Calculator

Estimate your tax refund and
where you stand

Get started
Tax Bracket
Calculator

Easily calculate your tax
rate to
make smart
financial decisions

Get started
W-4 Withholding Calculator

Know how much to withhold from your
paycheck to get
a bigger refund

Get started
Self-Employed
Expense Estimator

Estimate your self-employment tax and
eliminate
any surprises

Get started
Dependents Credit &
Deduction Finder

Know which dependents credits and
deductions
you can claim

Get started
Crypto Calculator

Estimate capital gains, losses, and taxes for
cryptocurrency sales

Get started

Comenzar en Español
Documents Checklist

Know what tax documents
you'll need upfront

Get started
Education Credit &
Deduction Finder

See which education credits and deductions you
qualify for

Get started
ItsDeductible™

See how much
your charitable donations are worth

Get started

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.