DoorDash is an online food ordering and delivery platform based in America. It was founded nine years ago in Palo Alto, California, and its headquarters are now located in San Francisco. DoorDash also operates in several other countries, including Japan, Australia, Canada, and Germany. If a Dasher makes more than $600 working for DoorDash, they are required to pay their taxes. This is in addition to a self-employment tax, which is a 15.3 percent tax that covers the expenses for Social Security and Medical Care.
Taxes As A DoorDash Employee–
Working as a DoorDash driver is considered to be self-employment. The employees are personally responsible for filing their taxes according to their earnings. Both cash and non-cash tips are included in this. In order to pay the taxes, the Dashers need to keep aside income throughout the year to pay their 1099. The Dasher app does not include a tax calculator. The taxable income is determined by subtracting any deductions from the money earned. It also depends on their filing status, which may be single, married filing jointly, married filing separately, head of household, etc. Generally, 30-40 percent of the income needs to be set aside to cover both state and federal taxes.
Why is the 1099 form important?
Using a 1099 form is the most efficient method to calculate the taxable amount. A 1099- NEC form is provided by DoorDash to the Dasher once they start working together.
Box No. 7–
Non-employee compensation is the most important box, which states the total DoorDash earnings of last year.
- If the Dasher is working with an accountant or CPA, they need to provide them with a copy of their 1099 and information on any tax deductions they are eligible for.
- If they are using tax software, the total earnings and any deductions they wish to make are entered into the software, and it calculates the taxes.
- If an employee wants to calculate their own taxes, they are supposed to use their Non-Employee Compensation Number, given on Schedule C, to report Gross Earnings.
- They also have to note which expenses they want to state as deductions. Next, the total business profit is entered in Schedule SE, which determines the amount of taxes payable on an employee’s independent income.
Tax Deductions for DoorDash–
Independent contractors have the opportunity to deduct costs from the taxes that they incur during the course of their work.
These include–
Mileage–
Independent contractors can deduct their non-commuting business mileage. This includes the distance covered during their drive to the first delivery pickup, between deliveries, and the drive back home at the end of the day. Mileage and gas cannot be deducted at the same time.
Phone Service–
The cost of the phone, accessories, and data that are required for work can be deducted. This can include car holders, chargers, etc. Only the percentage of the device or data being used for work can be included in the tax deduction process.
Hot Bags, blankets, courier bags –
These items are deductible as ‘ordinary and necessary business expenses. They are not supposed to be used for personal purposes, and if they are, that cost amount is not deductible.
Tolls and Parking–
Any tolls that are encountered during working can be deducted if they have not been reimbursed already. Paid parking is tax-deductible. Parking tickets, traffic violations, and speeding tickets are not deductible.
Inspections–
All expenses associated with vehicle inspections and background checks for work are tax-deductible.
Roadside assistance-
Many roadside assistance programs, including the AAA, are eligible for a tax deduction. There has to be kept a note of how much of these expenses are being used for work.
Health Insurance–
Self employed individuals are allowed by the IRS to deduct their health insurance premiums after meeting certain requirements.
Filing DoorDash taxes-
DoorDash issues 1099, which states the amount of income received by deliveries. Since most Dashers operate as sole proprietors, they still have to file a personal tax return. In case the payable tax amount is not deposited on time, the employee can be held accountable and penalized. Quarterly estimated tax payments can also directly be made to the IRS. This rules out the possibility of surprise tax bills. It is important to have a clear idea of deductible amounts to make tax filing easier and more efficient.
Conclusion-
DoorDash employees are required to file their taxes, on time, by using 1099. They are also eligible for certain tax deductions in accordance with the services that they require to work.
Frequently asked questions
What expenses can be claimed without a receipt?
Travel, Clothing, Union fee, Car expenses, phone calls, etc., are some of the expenses that are claimed without receipts.
Are non cash tips included in the taxable amount?
