Updated: 3/28/2020 – updated milleage deduction rate and updated new taxes changes for 2020. Included details for Form 8962.

Updated: 12/4/2018 – updated mileage deduction rate and updated which taxes deductions no longer is available.

Hey, couriers! It’s that time of year again. Tax season is upon us, and soon you’ll be receiving 1099 forms in the mail to file your taxes on your food delivery income. Filing your taxes can be intimidating if you’re not familiar with all the different tax terms (W-2, 1040-EZ, 1099-K, 1099-MISC, etc.). If you’re new to the freelance/gig economy life and this is your first time filing taxes on incomes from Postmates, DoorDash, Caviar, or any other gig economy platforms, it can be overwhelming.

This is what I learned from filing my own taxes in the gig economy. Whether you drive for Postmates, DoorDash, Caviar, GrubHub, or UberEats, or even rideshare services like Uber and Lyft the information below should be helpful to you.

What are these complicated tax forms?

It seems complicated, but once you understand the relationships between these forms, it’s not too bad.

There’s one form that you must send to the IRS to get a tax return. That is Form 1040. Depending on your situation you might fill out 1040, 1040A or 1040EZ.

To fill this form out, you need information about your earnings. This information is sent to you by your employer. If you work for a company that withholds taxes on your paychecks, that company will send you a W-2 form so you can fill out your 1040.

If you’re an independent contractor or self-employed, then you’ll receive Form 1099 in the mail with information about your earnings. Depending on your earnings you will receive a 1099-K, 1099-MISC or both (more on this later).

In both cases, you’ll fill out Form 1040 and submit it to the IRS.

Are taxes withheld from my weekly courier earnings?

The answer is no.  

There’s a huge legal debate going on right now on what food delivery drivers should be classified as. As of now, food delivery drivers are classified as independent contractors. Because of this classification, companies like Postmates, DoorDash, Caviar, and others, do not withhold social security or Medicare taxes from your weekly earnings. It’s the independent contractors’ responsibility to report their earnings to the IRS.

Which schedule do I fill out?

On the 1040 Form, there are 13 Schedules. Which schedule you should fill out depends on how you earn your income.

For on-demand food couriers, the answer is Schedule C.

What is Schedule C?

As independent contractors, couriers are sole proprietors of their own business and must report their earnings by filling out a Schedule C tax form. This form is used to claim profit or loss from your business expenses as an independent contractor.

Schedule C has six sections (Identity, followed by Part I through V):

• • Identity section. This is where you describe your business activities. Most important is when filling out this section, on Line B, the six-digit business code for food deliveries businesses is 492000 (Couriers & Messengers). If you also drive for Uber and Lyft, the code is 485300 (Taxi/Limo).

• • Part I is for Income. This is how much you earned from your delivery gigs (and rideshare, if applicable). The information you’ll need to fill this section out is found on the 1099-Misc or 1099-K form, which would be sent to you by the companies you drive for.
    • • 1099-MISC Explained: If you made more than $400 delivering food, you’d receive this form. Postmates would not mail you one if you made less than $600. If you made less than $400, you still have to report the earning. Not receiving this form doesn’t mean you don’t report that earning.
    • 1099-K Explained: This is the form for third-party payment transactions. You’d receive this form if you made more than $20,000 and over 200 transactions for the year. You’re more likely to get this in the mail if you drive for Uber or Lyft.

• • Part 2 is for Expenses. This includes all the costs you accumulated during the year as an independent contractor. Below, I answer more questions on what you can report as deductible expenses.

• • Part 3 is for Cost of Good Sold. This part needs to be filled out if you had inventory for your business. On-demand food couriers can ignore this section because you did not buy any inventory.

• • Part 4 is for information on your vehicle. Information on car usage is reported here.

• Part 5 is for other expenses not included in Part 2 and Part 4.

What is considered income?

All your payout earnings (which include order payout and in-app tips) found on the Form 1099 sent to you and cash tips. Also, any money you made from referring new couriers is considered income.

What are considered expenses/deductions?

You have options when it comes to your deductions.

Option 1. The Standard Mileage Method. If you have a good record of your mileage, this is the best option for couriers to get a larger deduction. Take the total number of miles you drove for your courier business and multiply it by 54.5 cents.

You can only deduct miles driven for business activities.

For example, if you drove 10,000 miles (according to your records) and 3,000 of those miles are for personal uses, you subtract the 3,000 miles from the total. Then you multiply 7,000 miles by 54.5 cents.

Total mileage: 10,000

Personal miles: 3,000

Business miles: 10,000 – 3,000 = 7,000

Standard Deduction rate: 54.5 cents.

Total deductions: 7,000 x $0.54.5 = $3815

Important: You must choose this method for the first year you’re using your car for business purposes. This method does not apply to motorcycles or bikes. For those types of transportation, use the Actual Expense Method.

Option 2. Actual Expenses Deduction

• • Car payments

• • Depreciation

• • Interest on car loan

• • License, title, registration fee

• • Gas

• • Maintenance cost

• Insurance premium. Keep in mind this is proportional to your usage for business purposes. If you use your car 30% of the time for business purposes, then you deduct 30% of your total insurance premium cost.

In addition to these methods, you can also deduct Common operating expenses. These includes:

• • Mobile phone

• • Phone charger

• • Cell phone plan. Keep in mind this is proportional to your usage for business purposes. If you use your phone 30% of the time as a driver, then you deduct 30% of your total phone plan cost.

• • Drinks & snacks for passengers (if you purchased these for rideshare)

• • Car washes

• • AAA membership

• • Environmentally friendly vehicle

• • Parking fees (not tickets)

• • Tolls

• • Gears purchased to drive on the platforms (thermo-bags, t-shirts, pizza bags, etc.).

• • Music services like Spotify

• • Floor mats

• • Spare tire

• • Jumper cables

• • Vomit bags (rideshare)

• • • Ice scraper
  • Snow chains

What can’t I deduct?

Tickets and fines you accumulated for traffic or parking violations are not deductible.

You cannot deduct miles that you drove to get home after a shift if the app isn’t on during your drive.

As of 2018 under the Tax Cuts and Jobs Act, there are some tax deductions individuals can no longer claim. Job expenses such as tools and equipment are no longer allowed. So if you purchased items for delivering as a courier, you can’t deduct these. Tax preparation fees. You used to be able to deduct the cost of preparing to file taxes, but not anymore.

What tax tools are out there?

There are several financial services for filing your taxes. Here are some highly credible ones (these are not affiliate links, I receive zero commission if you use these services):

• • H&R Block

• • • TurboTax
  • TaxAct

The benefits of these services are:

• • They help you understand the tax code a lot better.

• • Their software makes suggestions to help you maximize deductions.

• • These companies are established. This is important because you don’t want to provide important information to a random tax software and then the company goes out of business. Who knows what they’ll end up doing with your private information.

• In some cases, they cost less than having a tax expert help you file your taxes.

How do I make filing taxes easier in the future?

• • Keep track of your mileages. Use an app or manually keep records.

• • Keep track of your receipts for the future.

• • Keep track of all your cash tips earning.

• • If feasible, get another phone plan for business only.

• If feasible, open a business credit card so you can separate your personal and business expenses.

Conclusion

To summarize, couriers will fill out Schedule C on the 1040 form. Use information from the 1099 Forms mailed to you to fill out Schedule C. Make sure you account for all of your expenses to maximize your deductions. If necessary, use a software service that will make it easier to file. To make future filing less stressful, keep track of expenses throughout the year, electronically or manually.

Keep in mind, the information above are based on research I’ve done and from my experience filing my own taxes (in the State of Oregon). The purpose of this content is informative.

I’m not a professional tax consultant so do not take this information as tax advice. If you have any questions, I suggest seeking out a tax expert.
Good luck and I hope you get a nice tax return this year.