Your Ultimate Guide To Filing DoorDash Taxes

The rising need for on-demand food companies such as DoorDash has opened up a world of possibilities. Working as a DoorDash driver gives you lots of freedom and the opportunity to make good money. Those who do this full time or as a side-hustle, though, need to know a couple of things about filing DoorDash taxes.

You must understand that the IRS considers such workers to be independent contractors, even if they work full time. That means DoorDash won’t withhold any taxes from their paycheck.

You will get the chance to make decent money as a DoorDash driver, but with that added freedom comes the need for prudent tax responsibility. Tracking your expenses, estimating quarterly taxes, and filing your DoorDash taxes can be pretty overwhelming and might call for the services of a tax professional. This guide will spell out everything you need to know about filing your DoorDash taxes.

Tax Forms to Use When Filing DoorDash Taxes

DoorDash drivers are expected to file taxes each year, like all independent contractors. DoorDash will send you tax form 1099-NEC if you earn more than $600. Drivers who make more than $20,000 with more than 200 transactions will have to file form 1099-K.

Please note that DoorDash will typically send independent contractors their tax form by January 31. You will have to highlight all your business profits for the year and any expenses you claim as deductions.

Tax Expenses to Write Off

Independent contractors are responsible for calculating and paying their taxes, so they have to keep track of their business profits. They should also log all business expenses so they can claim the tax deductions available to them. Here are a couple of expenses you can claim deductions on:

Mileage

The IRS allows DoorDashers to claim tax deductions on any business mileage they incur on deliveries. You should log your miles from when you first start your deliveries until you finish your last one. It is, however, worth noting that the IRS will not allow you to claim tax deductions on both gas and mileage. The IRS set the standard deduction at 56 cents per business mile for 2021.

Phone Bill

You have to use your phone a lot when you are a DoorDasher. The job typically involves making several business calls during the day and using lots of data. The constant driving also means you need a phone charger, among other essential phone accessories. All of these are deductible, but you will have to distinguish between personal and business use.

Tolls

Dashers may have to pay tolls while conducting their business. Any toll fees you pay while working are tax-deductible unless DoorDash reimburses you for them.

Parking Fees

You may also have to pay to park sometimes while you’re completing your deliveries, and you can claim deductions on the parking fees. Tickets for parking or traffic violations aren’t tax-deductible, though, because the IRS doesn’t consider these work-related.

Health Insurance

Health insurance is important, especially to an independent contractor who doesn’t have an employer plan. A full-time DoorDasher can deduct the costs of health insurance when filing DoorDash taxes.

There are, however, a couple of requirements from the IRS if you wish to claim deductions on your health insurance policy. You should ensure that the health policy is in your actual name or the name of your business, for one. You are also not allowed to claim deductions for months where you were eligible for an employer’s subsidized health policy.

Motor Vehicle Inspections

Not all deliveries require you to conduct regular motor vehicle inspections. The IRS allows delivery drivers to claim tax deductions for the costs of motor vehicle inspections.

Courier Backpacks and Insulated Bags

Hot bags are important to anyone working as a DoorDasher because delivering food cold is a sure way to get poor ratings. An insulated hot bag ensures that your customers get food that is still sizzling hot. The IRS allows you to deduct the cost of these bags, and they are just one example of deductions available for the essential tools for your job.

This list is only partial, given the complexities of the tax code and the evolving laws that cover the gig economy. It’s a good idea to talk with a tax professional about tax deductions for freelancers and small businesses. Getting expert advice is the best way to make sure all of your bases are covered.

How Much You Should Set Aside for Tax Payments

The IRS leaves independent contractors and other self-employed individuals responsible for paying their taxes since they have no employer to withhold them. The lack of withholding also means you need to estimate the taxes you owe and make quarterly payments of that amount to the IRS.

There is no defined amount that you should withhold because this figure depends on factors such as your taxable income or filing status. The rule of thumb is to set aside 30% to 40% of your taxable income and send it to the IRS in quarterly payments. You can claim a refund from the IRS for any overpayment when you file your tax return.

Silver Tax Group Can Help With Your DoorDash Taxes

Working as a delivery driver gives you a lot of freedom and the chance to make good money, but it can be challenging to figure out your tax obligations. Silver Tax Group has an experienced team that can assist you in preparing your DoorDash taxes and taking advantage of any deductions available to you.

Our expert tax attorneys have a long record of success in getting the best tax outcomes for our clients and defending them in any disputes with the IRS. Contact our office today for a quick consultation about DoorDash taxes or any other taxation questions.