Shipt Shopper Tax Guide

Content provided for general information. Always talk to your tax advisor before making important decisions.

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If you work for Shipt, it shouldn’t be any surprise that you have to pay taxes. If you’re a smart shopper, you’ll find out ways to pay less in taxes while making more money.

Does shopping for Shipt count as being a self-employed worker?

Shipt shoppers are typically independent contractors or self-employed. There are a few exceptions.

  • Some stores use their own employees to pick orders or bring them out to customers who opted for pickup instead of delivery. If this applies to you, you’re an employee of that store rather than Shipt.
  • There are ongoing legal battles in states like California arguing that shoppers are employees rather than self-employed people. In some cases, judges have ruled that gig workers are employees and then been overruled, so the workers are back to being classified as contractors. Make sure you’re aware of how shoppers are classified in your state.

This post primarily discusses the self-employment tax rules for independent contractors. Employees have a much easier time filing their income tax returns because they don’t have to pay estimated taxes and generally aren’t allowed to deduct any expenses.

Does it matter if you’re full-time or part-time?

Unlike an employee position where you might qualify for different benefits based on your hours, independent contractor positions don’t have a distinction between full-time and part-time. Your taxes are based only on how much money you make.

Does it matter if you’re a full-service shopper, store shopper, or only do the deliveries?

Some stores may use their own employees for certain tasks, while others will let Shipt shoppers handle the entire process.

Different positions may have slightly different tax situations, though. For example, if you shop and deliver groceries, you could have mileage deductions for deliveries, but if you only shop, you likely wouldn’t have a mileage deduction.

What tax forms do Shipt independent contractors get?

Shipt sends its independent contractors Form 1099-NEC. Form 1099-NEC is a new name for Form 1099-MISC. You will get a Shipt 1099 if you earn more than $600 in a year. The IRS requires Shipt to provide your 1099 by January 31st each year.

When you join Shipt, they will ask you to provide a Form W-9. W-9s are for independent contractor positions and tell Shipt your legal name, address, and tax identification number. There is no tax withholding for independent contractors (more below).

How do you get your Form 1099-NEC from Shipt?

Shipt sends their tax forms using Stripe. If you don’t receive your Shipt 1099, contact the Shipt help center. Remember you may not get a 1099 if you made less than $600 during the previous calendar year.

Can you file your taxes if you haven’t received your 1099?

Yes, your 1099 just tells you and the IRS what you made last year. If you already know how much you made, you don’t need the 1099 to file your tax return. You just enter the amount that would be on your 1099.

Some tax software asks you to enter your 1099s. This is just to help it do the math for you. It doesn’t matter if you enter your income as a 1099 or if you enter it as business income not reported on a 1099. The reason is that your tax return only shows your total business income on a single line.

Your tax software only asks for things separately to make sure you don’t forget anything.

If you want to enter a 1099 for Shipt before you have it, you’ll need the following information.

  • Your total earnings from January 1st to December 31st. You can find this in your shopper account or keep records in your own bookkeeping app.
  • Shipt’s official name is Shipt, LLC.
  • Shipt’s EIN is 47-1112743.
  • Shipt’s business address is 17 20th Street North, Suite 100, Birmingham, AL, 35004.

Should you make an S-corporation to do Shipt?

An S-corporation may help you in limited situations. Learn about S-corporations here.

What taxes do Shipt shoppers pay?

Self-employment income is subject to income taxes according to your tax bracket the same as any other income. You’ll also pay self-employment taxes.

What are self-employment taxes?

You pay the full Social Security and Medicare taxes that both an employee and employer would pay. That’s a total of 15.3% for most people.

At a W-2 job, you pay 7.65% through your FICA withholdings and your employer pays the other 7.65%. This includes shoppers who are employees.

What about state taxes?

If you’re in a state that has an income tax, you’ll also likely need to pay state income taxes on top of your federal income taxes. This would usually work just like any other income you have to pay state income taxes on.

In most states, you simply transfer the numbers over from your federal tax return. You’d then pay tax based on the net profit you already calculated.

How do you calculate an estimate of how much you’ll pay in taxes?

  1. _____ Earnings in the app
  2. _____ Cash tips
  3. _____ Deductible business expenses
  4. _____ Your profit = Line 1 + Line 2 – Line 3
  5. _____ Line 4 x 15.3% = Your self-employment tax
  6. _____ Line 4 x 73.88% = Your taxable income after the deduction for 1/2 of self-employment tax and the Qualified Business Income deduction
  7. _____ Look up Line 6 in your tax bracket to find the income tax you owe
  8. _____ Line 5 + Line 7 = Your total federal tax

Keep in mind that this is a rough estimate that doesn’t account for your other deductions or tax credits as well as any other income you have. If you don’t feel like doing the math, most people can get pretty close to what they’ll owe by setting aside 25-30% of their profits for taxes.

What counts as your income?

You have to report all the electronic payments you receive through the app plus any cash tips as income. You may be able to take deductions, but we’re not there yet. When your tax return asks for income, it means everything you got paid not after expenses.

Don’t try to not claim tips, either. Restaurant workers have tried all the tricks in the book such as trying to argue tips are gifts not income. The IRS said no.

(But read this if you are looking for under the table jobs.)

Is the Fill Up Bonus taxable?

Yes, the Fill Up Bonus is taxable income. It counts the same as your earnings from trips.

Even though the purpose of the Fill Up Bonus is to offset rising gas prices, you can’t exclude it from your income. Independent contractors don’t get non-taxable expense reimbursements the same way employees do.

Instead, you report the reimbursements as income and claim your gas or miles as a deduction (more below).

When are your taxes due?

Shipt shoppers typically file personal tax returns by April 15th for the income you earned from January 1st to December 31st the prior year. You’ll include the taxes on your Form 1040 due on April 15th.

If you have a W-2 job or another gig, you combine all of your income into a single tax return.

Does Shipt take out taxes?

Shipt does not take out taxes. Plan ahead to avoid a surprise tax bill when tax season comes.

  • To pay your taxes, you’ll generally need to make estimated tax payments. This is sometimes also known as quarterly taxes.
  • If you do Shipt for extra cash and have a W-2 job, you have the option to increase your withholding at that job to cover all of your taxes instead of making quarterly payments. You can also do a combination of increased withholding and quarterly payments.

What deductions can Shipt shoppers take?

You can deduct your business expenses from your income on Schedule C of your tax return. You do not claim business expenses as itemized deductions on Schedule A. You don’t have to itemize to claim business deductions.

The most common tax deductions for delivery drivers are:

Car Expenses

You can deduct expenses like your gas, maintenance, and insurance. You can either track all of your expenses or claim a standard mileage rate.

For most people, taking the standard mileage rate gives the biggest deduction. See here for a comparison between the standard mileage rate and actual expenses method.

Shipt shoppers are facing the challenge of high gas prices in 2022. The IRS increased the standard mileage rate from 58.5 cents per mile to 62.5 cents per mile for the second half of 2022. The rate normally adjusts each calendar year.

There are many apps you can use to automatically track your miles (the IRS requires you to keep a mileage log).

You can deduct trips from the store to your customers and back to the store. You can’t deduct your first trip from home to the store or your trip home from your last customer. Those first and last trips are considered commuting, rather than business, miles and aren’t deductible.

Cell Phone Expenses

You can deduct your cellphone plan but only the portion of it you use for business.

You’d need to have a way of tracking your data, minutes, and texts and figuring out what percent of your phone use is business versus personal. You can deduct the business percent of your bill.

Food Delivery Bags, Boxes, Coolers, Drink Carriers, Etc.

If you buy gadgets or equipment to make shopping or delivery easier, it’s potentially deductible.

For these items, you really want them to be something you use only for business and never for any personal uses. You can try for a partial deduction if you also use it for personal reasons, but the IRS could get picky and deny it.

It’s one of those things where you can be technically correct, but it may not be worth fighting.

Health Insurance Premium

You may be able to deduct your health insurance premiums if you weren’t eligible for health insurance through an employer and purchased your own health insurance out of pocket.

Do you qualify for the 20% QBI deduction?

Since you’re an independent contractor and classified as a sole proprietor, you qualify for the Section 199A Qualified Business Income deduction.

For most Shipt shoppers, you get a deduction equal to 20% of your net profits. That means you’d only pay income tax on 80% of your profits.

The QBI deduction does not reduce the 15.3% in self-employment taxes. Self-employment taxes are still based on 100% of your profits.

Can you deduct your retirement contributions?

Your profits count as earned income that you can put into a Traditional IRA or Roth IRA.

If you want to save even more, you can open a SEP IRA or solo 401(k). This allows you to make tax-deductible employer contributions of up to 20% of your profits.

If you don’t have a 401(k) at work or choose not to use it, you can also make your full employee contribution. Note your 401(k) employee contribution limit applies for all of your 401(k)s combined, not per job.

Does the tax-exempt card mean you don’t have to pay taxes?

There’s been some confusion over whether Shipt is tax-exempt because you need to use a tax-exempt card while shopping. This applies to sales tax and does not affect your income tax on your earnings.

Sales tax is only charged to the final customer. Because the customer pays applicable sales taxes on their final total with Shipt, Shipt doesn’t pay sales tax to the grocery store like a direct retail customer does.

How do you file your tax return?

If you’re comfortable with the basics of this information, tax time should be easy. Most online tax software providers have self-employed versions that are specifically for jobs like Shipt.

All you need to do is answer the questions and enter your information. Some people still prefer to have someone else do their taxes the first year so they can learn or if they need advice.

What how does filing taxes work if you work for other delivery services?

Instacart taxes and taxes for other food delivery services work like Shipt taxes.

Since you’re filing as a business owner with multiple clients, you should include your income from Shipt, other grocery delivery apps, and similar gig platforms on the same Schedule C.

You would only use separate Schedule Cs if you had a completely different independent contractor position like having a lawn care business.

Frequently Asked Questions

Does Shipt take out taxes?

Shipt usually won’t take out taxes since you’re an independent contractor and have to pay estimated taxes. The exception is if you accepted an employee position.

What miles can you deduct?

You can deduct your business miles. That’s usually all your driving except your house to your first stop and your last stop to back home.

Do you get a W-2 from Shipt?

Since you’re an independent contractor, you get a 1099-NEC form instead of a W2.

Are Shipt tips taxable?

Yes, tips are taxable. Tips you receive in the platform should be included in your 1099 but are taxable even if they’re not. Cash tips also have to be reported.

How much do Shipt shoppers pay in taxes?

How much you pay depends on how much total income you have from all sources. You will pay 15.3% in self-employment taxes plus 0 to 37% in income taxes.

What can I write off on my taxes for Shipt?

You can write off ordinary and necessary business expenses. This includes your business mileage and special tools you need to buy for your business.

Does Shipt provide a gas reimbursement?

Shipt doesn’t reimburse your expenses, but you can deduct your car expeses on your tax return.

Does Shipt pay more than Instacart?

Shipt and Instacart have similar pay. Which one pays more depends on demand in your area, which stores each platform services, and customer tipping. You can learn more at Is Instacart Worth It?

Conclusion

Doing taxes for Shipt isn’t hard, but you need to take the time to learn how to do it. Make sure you keep track of your deductions, like your mileage and other business expenses. You can file your taxes on your own, but you can also use a tax preparer the first time you file if you want to make sure you do it right.

Thanks for reading.

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