- You should have received a Form 1099-K from your rideshare company showing the gross amount earned from your rideshare business in box 1a. Remember, this amount is gross earnings. It does not include any fees or commissions you have paid to Uber or Lyft. Be sure to access your rideshare dashboard and account for these expenses that you have paid, but have not been reported to the IRS. Additionally, if you made over $600 in bonuses or miscellaneous income then you may have also received a Form 1099-MISC. This form is pretty straightforward; whatever number appears in Box 3 or Box 7 is the additional amount you earned and should be combined with the gross earnings from your 1099-K.
- Incidentally, a lot of people think that you can just report the net amount of payments you have received as one line item on your tax return and be done with the whole calculation of expenses business. While this theoretically would produce the same net profit, it would cause a mismatch with the number that your rideshare company reports to the IRS, and you would more than likely get a notice from the IRS for the difference.
- Track all of your deductions. Many of you are wondering if you should be tracking your miles or keeping track of your actual expenses. While it varies with each individual taxpayer, for most of you, the standard mileage rate will likely make more financial sense. For 2014, the IRS allows a standard rate of 56 cents per mile. This rate will be increased to 57.5 per mile in 2015. Your rideshare dashboard usually provides the number of miles you drove while on a trip. Be sure to remember to document the miles to get to that trip. This counts. There are 3 very important rules when it comes with dealing with the IRS and mileage. These are: 1) documentation, 2) documentation, and 3) documentation. Your mileage logs are the only items the IRS will accept as proof in the event you are audited.
- Keep track of all other Ordinary and Necessary expenses such as car washes, snacks for passengers, cell phone use, satellite radio subscriptions, trunk organizers, etc. The key here is ordinary and necessary. Things like cell phone use will have to be allocated between personal and business use.
- Did you make any estimated tax payments during the year? These payments are included on your filed tax return and reduce any tax liability you may have. These payments are due on a quarterly basis throughout the year. If you have not done so already, it is a good idea to calculate your tax liability (or find a professional that can do this for you) to eliminate any potential interest and penalties that the IRS can assess for not making estimated payments.
- Set up better habits for the next year. A very large percentage of the work associated with taxes is having everything organized and in one place. Keeping good track throughout the year not only helps you understand how your business is doing, but it minimizes the work later.
If you are still confused or have complex tax situation, we are here to help. Book us to prepare your Federal and state (if applicable) tax returns.