Fortunately your Form 1099 has a lot of useful information that you need on it. But first off, congrats! Choosing yourself is a lot harder than it seems. Being your own boss has many advantages, and, sure, some disadvantages. The feeling of being in charge of how much money you earn is great. Hopefully you had some idea of the taxes to come and you set aside some money. If not, try not to worry. Handle it the best you can this year, and know that you’ll have a much better grasp of things to come next year.
A Form 1099 is used to report income both to you and to the IRS. The IRS uses this information to make sure you are reporting all your income on your tax return. Note – just because you did not receive a Form 1099 does not mean you do not need to report any income. For my example, I’m going to go over a typical Form 1099 that you might receive from Uber. The ideas apply to other rideshare companies as well.
Your gross earnings reflect your total fares collected – this amount is before any fees charged by Uber or other expenses. Your gross income less any deductions you are entitled to determines the amount of income that is subject to tax. Your income and deductions get reported on Schedule C. This schedule is used to figure your net income subject to tax, as stated earlier.
If Uber is the one issuing you the Form 1099, they do report additional information besides just your gross earnings on its 1099 Tax Summary Report. Look for anything in bold for the items and amounts that you can deduct. Uber tracks your fare mileage driven and any tolls paid, which would be included as a bold item. They will also list your Uber fee (approx. 20% of your gross fares) and any split fares, safe rides, referrals, and device subscription fees. All of these are deductible expenses and will reduce your gross fares (your income) to arrive at your net income.
These expenses basically reflect the minimum amount that you may be entitled to. You should definitely take advantage of the information reported to you on a Form 1099. However, there are additional expenses, with the big one being mileage to get to your fare pickups, that you can include. Check out this article and others on my website to get a better idea of the items you can deduct. You can check out the IRS’ official 1099 instructions for the most recent year here.