Top 5 Things Every Lyft Driver Needs to Know About Taxes
If you are a Lyft driver, you are self-employed, which means you are responsible for paying your own taxes. Tax season can be confusing and overwhelming, but it doesn’t have to be. Here are the top 5 things every Lyft driver needs to know about taxes.
1. Keep Accurate Records
The first step to staying organized during tax season is to keep accurate records. Keep track of your mileage, gas expenses, and maintenance costs. You can also deduct other expenses like tolls and car washes. WalletHub has reported that you can even deduct lease payments, payments for a loan, insurance payments, and other vehicle-related expenses.
Keeping track of these expenses throughout the year will make it easier to file your taxes when the time comes. You can use an app like Stride Tax or QuickBooks Self-Employed to help you keep track of your finances.
2. Understand Your Deductions
As a self-employed individual, you can deduct certain expenses on your taxes. Lyft drivers can deduct the expenses associated with their work, such as:
– Vehicle expenses: gas, maintenance, repairs, insurance, car washes, etc.
– Phone and internet expenses: if you use your phone and/or internet for work.
– Fees: Lyft’s commission, safe ride fee, other miscellaneous fees.
– Other work-related expenses: business cards, supplies, water for passengers, etc.
The US IRS website can provide more information about the specific deductions available to self-employed individuals.
3. Pay Your Estimated Taxes
Lyft drivers are considered independent contractors and must pay estimated taxes on their earnings each quarter. These payments will be applied to your annual tax bill and prevent you from having to pay a large sum at the end of the year. Tax websites like TurboTax and the IRS.gov website can help you calculate your estimated taxes.
4. Understand Your 1099
Lyft will provide you with a 1099 form that shows your earnings for the year. You will need to use this form when filing your taxes. If you made more than $20,000 and gave more than 200 rides in the year, you may receive a 1099-K in addition to the 1099-MISC. Don’t forget to include both forms when filing your taxes.
5. Consider Hiring a Tax Professional
If you are confused or overwhelmed by your taxes, consider hiring a tax professional. A professional can help you ensure all your deductions are included, handle any audits for you, and assist with any concerns or questions you may have.
Conclusion
Tax season can be overwhelming, but as a Lyft driver, there are steps you can take to make it easier. Keep accurate records throughout the year, understand your deductions, pay your estimated taxes, and know your 1099. If you need help, consider hiring a tax professional. By staying organized and informed, you can file your taxes with confidence and avoid any surprises.
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