If you work as an independent contractor medical courier, here’s what you need to know about filing taxes and maximizing your deductions.
What’s the difference between an employee and an independent contractor?
Many medical courier services hire delivery drivers as independent contractors, but others use employees.
The key differences between an independent contractor and an employee are:
- Independent contractors don’t have taxes withheld
- Independent contractors have to pay self-employment taxes
- Independent contractors can deduct expenses
The last point is very important to know if you’re getting hired as an employee. If you have to use your own car as an employee, you can’t deduct gas if your employer doesn’t pay for it. You also can’t deduct any other expenses you have. So you may not want to take a job as an employee without making sure your employer pays for your expenses.
How much will an independent contractor courier pay in taxes?
The self-employment tax rate is 15.3% and covers Social Security and Medicare taxes. Income taxes depend on your tax bracket and follow the same tax rates as any other job.
Your self-employment taxes are based on your net profit after you deduct your business expenses.
You’ll generally only pay income taxes on 73.88% of your net profit. That’s because
- Your taxable income excludes one-half of your self-employment taxes (the employer’s share).
- You get an additional Qualified Business Income deduction equal to 20% of your net profit.
The Qualified Business Income deduction is an automatic deduction that applies to medical couriers and most other self-employed business activities.
When are your taxes due?
You’ll need to file your tax return by April 15th of each year.
In addition, you’ll usually need to make four quarterly estimated tax payments each equal to about 25% of the taxes you’ll owe for the year. There are two different ways to calculate your estimated tax payments based on either this year’s or last year’s taxes.
| Based on Current Year Tax Return | Based on Prior Year Tax Return | |
| AGI up to $150,000 ($75,000 if married filing separate) | 90% of current year taxes | 100% of prior year taxes |
| AGI over $150,000 ($75,000 if married filing separate) | 100% of current year taxes | 110% of prior year taxes |
Here’s a complete look at your tax deadlines.
| Action Needed | 2022 Tax Year | 2023 Tax Year |
|---|---|---|
| First Quarter Estimated Tax Payment Due | April 18, 2022 | April 18, 2023 |
| Second Quarter Estimated Tax Payment Due | June 15, 2022 | June 15, 2023 |
| Third Quarter Estimated Tax Payment Due | September 15, 2022 | September 15, 2023 |
| Fourth Quarter Estimated Tax Payment Due | January 17, 2023* | January 16, 2024* |
| Receive Your 1099 | No later than January 31, 2023 | No later than January 31, 2024 |
| File Your Tax Return | Tuesday April 18, 2023 (15th is a Saturday; Monday is Washington, D.C., Emancipation Day) | April 15, 2024 |
| Extended Filing Deadline | Monday October 16, 2023 (15th is a Sunday) | October 15, 2024 |
What tax deductions can medical couriers claim?
As a medical courier, most of your tax deductions will be for car expenses.
One option is to keep a mileage log to track your business miles and deduct a standard mileage rate as follows.
- 2023: 65.5 cents per mile
- 2022 July through December: 62.5 cents per mile
- 2022 January through June: 58.5 cents per mile
- 2021: 56 cents per mile
You can also claim your actual car expenses (you’ll still need to track your mileage). Actual expenses can include:
- Gas
- Insurance
- A roadside assistance plan
- Car maintenance
- Depreciation
- Other expenses of owning and maintaining your car
You can only deduct the business portion of your expenses based on your mileage. For example, if half of your miles are for work and half of your miles are for personal trips, you can usually deduct 50% of your maintenance.
In addition to either the standard mileage deduction or your actual expenses, you can also deduct things like:
- Parking fees
- Tolls
- Any special equipment you had to buy to do your job
- Mobile phone costs based on how much you use your phone for personal versus business use
Motorcycles, Electric Bikes, and Standard Bicycles
If you deliver using any type of bike ranging from a manual bicycle to a full-on motorcycle, you’re not allowed to use the standard mileage deduction. That rate is for cars and trucks.
Instead, you can only claim your actual expenses.
Walking Couriers
If you work in a big city or large hospital complex and deliver on foot, you won’t have vehicle expenses to claim. (Your commute between work and home isn’t deductible.)
You may still have other expenses such as a courier bag or other supplies you need to do your job. And don’t feel bad if you don’t have many deductions — it just means you didn’t have to spend as much money to do your job so you made more.
How do medical couriers file taxes?
If you’re an independent contractor, you should get a Form 1099 from each courier service that paid you at least $600 during the year. If you don’t get a 1099 for some reason, you still have to report that income and pay taxes.
You’ll normally report your business income and expenses on Schedule C of Form 1040. If you use tax filing software, it will guide you through entering your income and expenses.
Tax preparation software can also help you find any deductions you might have missed. Once you enter your information, it will automatically calculate things like the Qualified Business Income Deduction and deduction for one-half of your self-employment tax.
