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.
• If you’re an employee of Amazon, UPS, or another company, your Social Security, Medicare, and possibly federal and state income taxes will be withheld from your paycheck. At the end of the year, you’ll receive a Form W-2 showing the income you earned for the year and total tax withheld. Use this information to file Form 1040.
• If you’re an independent contractor, you’re responsible for paying both the employer and employee portions of your Social Security and Medicare taxes, also known as self-employment taxes. Use Schedule SE to calculate this tax.
• As an independent contractor, you should receive a Form 1099-NEC showing your total earnings for the year. You should receive a 1099-NEC from each company you deliver for.
• If you’re an independent contractor, you can typically deduct work-related expenses on Schedule C. These write-offs may include mileage, tolls, mobile phone charges, supplies, and more. Typically, these deductions are not available if you’re an employee.
Taxes for delivery drivers
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 should 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 25.
- 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.
TurboTax Tip: If you’re an independent contractor and expect to owe taxes of $1,000 or more, you're usually required to make quarterly estimated tax payments in order to avoid underpayment penalties. Those payments are generally due during the year on April 15, June 15, September 15 and then on January 15 of the following tax year.
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 the first half of 2022 the rate is 58.5 cents per mile and increases to 62.5 cents per mile for the second half of 2022. 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.
With TurboTax Live Full Service Self-Employed, work with a tax expert who understands independent contractors and freelancers. Your tax expert will do your taxes for you and search 500 deductions and credits so you don’t miss a thing. Backed by our Full Service Guarantee. You can also file your self-employed taxes on your own with TurboTax Self-Employed. We’ll find every industry-specific deduction you qualify for and get you every dollar you deserve.