Uber has become a great way to get around with a door to door taxi service that is entirely operated by a mobile app. Since its launch in 2009, Uber has taken over the way we get from place to place. In 2018, 95 million people used the Uber app on a monthly basis, and it was forecasted that in 2019, it would be up to 110 million people using Uber monthly. In total, over 20 billion Uber rides have been taken since it launched. The more people using the app means there is more demand for Uber drivers to keep up with the customers. Many people enjoy working for the company because it’s fully independent. You are your own boss, so you can decide when you work and which rides you want to accept.
Although you’re an independent contractor, you still need to file and pay taxes. Uber doesn’t automatically take out taxes when they pay you. There are some things you should know about paying your income taxes if you’re a driver for the company. We’re here to tell you everything you need to know to stay legal while being your own boss.
Filing as an Independent Contractor
The first thing you must understand is that filing as an independent contractor is different than for other jobs. If you are a United States resident, this means a 1099 form, and if you are a Canadain resident, it’s a T2125 form.
Uber doesn’t withhold any money from your paycheck, so you will need to pay an amount when you file. At https://www.canadiantaxamnesty.ca/ they state, “The full or part-time status of an Uber operator does not affect the requirement to report all Uber income on a Canadian tax return.”
A 1099-K form will report the sum of the money you received for all of the rides, including your Uber commission or other fees. You can add on deductions here, which will lower your amount due to the government. In Canada, Uber functions similarly, but with other forms. The T2125 form reports your total income with the company, and then you can add deductions as well.
Deductible Costs
Now you know what forms to fill out, let’s talk about how to lower the taxes you owe. Any expenses that are linked with performing your job is considered deductable. For Uber drivers, it’s mostly car-related expenses.
It’s crucial to keep track of the mileage you do in your car while working for Uber. This doesn’t only include the actual ride, but also the miles it took to get to the pickup location, the waiting time, and the miles you had to drive if a trip was canceled. All of these miles can be deducted.
Also, other fees that can be deducted are oil changes, highway tolls, tire changes, first aid kit, regular maintenance fees, and airport or parking fees. Along with car expenses, you can write off mobile device costs because it’s an integral part of the job.
You can deduct the cost of the smartphone, car mounts to stay hands-free while driving, car chargers, and any paid updates needed. Other things that can lower the price are those that make the experience better for the passengers such as, water bottles, snacks, nicer floor mats, or comfortable seating.
For these deductions to go through, you must keep all receipts and reports as proof of purchase. You’ll need to pay all of these deductable costs upfront, and they are paid back by taking the amount out of the money you owe.
Not Filing Your Uber Income
If you’re thinking about not filing your taxes from Uber because you haven’t saved enough money or don’t want to pay, we wouldn’t recommend it. If you fail to report your income with any job to the government to the United States or Canada, then you can face severe penalties.
These penalties can be significant fines you must pay, along with the original taxes owed plus interest. Depending on how much or how serious, you can even be sentenced to jail for this.
It’s essential to always file your taxes correctly to avoid this. If you feel like you need assistance to make sure you are filing correctly, then you can talk to an accountant or tax expert to help you.
The Bottom Line
Uber is a great way to make some extra money because you’re your own boss and set your hours. As an independent contractor, you must file taxes and pay what you owe during tax season.
You always want to make sure you are filing the correct forms, reporting costs to deduct and pay the taxes you owe to stay out of more significant penalties or legal troubles. Uber will continue to grow, and more drivers are needed every day!
