Navigating the world of taxes as a Gopuff driver can seem like a daunting task, particularly to those who are new to the gig economy or self-employment. Understanding how your income is taxed, accounting for business-related costs, completing the proper tax forms, and staying abreast of tax deadlines and potential penalties are all crucial components to become well-informed and compliant with the tax law. This guide is designed to thoroughly equip you with the knowledge necessary to accurately file your taxes as a Gopuff driver and take advantage of the tax benefits you’re entitled to. These insights underscore the distinction between being an employee and an independent contractor while shedding light on the aspects directly affecting your tax obligations.
Understanding Taxable Income as a Gopuff driver
Understanding Your Income as a Gopuff Driver
As a Gopuff driver, your earnings primarily come from your delivery fees, tips, and bonuses. All of this income is considered taxable and should be reported on your annual tax return. You should keep a close eye on each of these earnings, documenting them accurately to ease the tax filing process.
Classification: Employee Versus Independent Contractor
A crucial aspect of understanding your taxable income lies in understanding your role as a Gopuff driver. Notably, Gopuff drivers are classified as independent contractors and not employees. The company does not withhold taxes from your earnings, leaving you responsible for your own tax payments.
As an independent contractor, you’ll need to report your income using different forms from traditional employees. You’ll primarily use Schedule C or C-EZ (Form 1040) to report your income or loss from a business you operated or a profession you practiced as a sole proprietor. You’ll also use Schedule SE (Form 1040) to figure your self-employment tax.
Sources of Taxable Income
As a Gopuff driver, your taxable income includes, but is not limited to, delivery fees, tips, and bonuses. Any cash you receive from Gopuff users should be calculated and included when filing your taxes.
Keeping Track of Tips and Bonuses
For tips and bonuses, record the amount you receive after every delivery ride. At the end of the day, calculate the total and keep these daily records safe. You can use these records to tally up your total tips at the end of the year, which you’ll report as additional income on your tax filing.
Tax Deductions for Gopuff drivers
Understanding deductions is also critical for a Gopuff driver. Since you’re an independent contractor, several business expenses could potentially be deductible. These may include costs associated with your vehicle like gasoline, maintenance, and repairs, as well as any necessary supplies or equipment you need to perform your job. You may also consider speaking to a tax professional to help you identify other possible deductions.
Taking the time to understand your income and tax obligations as a Gopuff driver can help make the tax filing process less daunting and potentially save you money by taking advantage of eligible deductions. It’s a proactive approach to avoid year-end surprise and potential stress at tax time.
Tracking and Deducting Business Expenses
The Importance of Tracking Business Expenses
As a Gopuff driver, it’s essential that you keep records of all your business-related expenses. These might include car maintenance costs, insurance, gas, tolls, and any equipment you need for your car such as GPS devices or car chargers. The reason for keeping track of these costs is that you can deduct them on your tax return, which may significantly reduce your tax bill.
Tracking Business Expenses as a Gopuff Driver
Brand-specific cost tracking apps and tools are useful, but there are also several simpler ways to track your expenses. One straightforward method is to use a spreadsheet where you can record all costs related to your business. Write down the date of the expense, the total cost, where the expense happened, and a brief explanation.
For receipts and records, you can digitally scan and save them on your computer or smartphone. Also, there are mobile apps available that can help you categorize and track your receipts.
Some tools, such as accounting software or apps like Quickbooks or Expensify, can automate expense tracking for you. They can link directly to your bank account or credit card, automatically recording and categorizing expenses.
Deducting your Expenses on your Tax Return
When it comes time to file your taxes, these records of expenses come in handy. If you are a Gopuff driver, you can declare your earned income on Schedule C of the IRS Form 1040. This is where you can also report your expenses.
Some possible deductions for Gopuff drivers include the standard mileage rate (56 cents per mile for 2021) or the actual expenses of operating the vehicle if it’s used exclusively for business. You can also deduct vehicle depreciation, car maintenance, insurance, vehicle registration fees, mobile phone expenses, meals while on duty, and more.
It’s essential, however, to only deduct legitimate business expenses. Personal expenses are not deductible.
Finally, it’s recommended to consult with a tax professional when declaring and deducting expenses. They can help you understand what qualifies for a deduction and how to properly record and deduct these on your tax return. This ensures you’re deducting the maximum amount allowed while remaining within the legal guidelines set by the IRS.
Filling Out and Submitting Tax Forms
Identify Necessary Tax Forms for Gopuff Drivers
As a Gopuff driver, or any rideshare employee you fall under the category of independent contractors, which means that you need to fill different tax forms compared to traditional employees. The key forms to concentrate on are IRS Form 1099-NEC and the Schedule C and SE.
- Form 1099-NEC is what you’ll receive from Gopuff summarizing your annual earnings and the taxes already paid.
- Schedule C (Profit or Loss from Business) is where you report your income and take account of your business expenses, with the net result affecting your income tax and self-employment tax.
- Schedule SE (Self-Employment Tax) is what you will use to calculate the taxes you owe on your net earnings from self-employment.
Locating the Appropriate Tax Forms
You can find these forms from the IRS website. On the website’s main page, look for a search bar towards the top-right of the screen. Enter the name/number of the form you are looking for (Form 1099-NEC, Schedule C, or Schedule SE) and hit enter. From the search results, select the entry that matches what you’re searching for.
Filling Out Your Tax Forms
- For Form 1099-NEC, Gopuff will send it to you. Check the “Nonemployee compensation” box to see your total income.
- In Schedule C, fill in Part I, which involves reporting your gross earnings and returns and allowances. After that, fill in Part II by entering your expenses. You total these to calculate your net profit or loss.
- In Schedule SE, you need to transcribe your net income from Schedule C into Section A or B depending on whether you made more or less than $400. After filling out the rest of the form, you’ll have calculated your self-employment tax.
Ensure to fill out all necessary identifiers such as your name, taxpayer ID, home address, etc., which are usually located at the top section of the forms.
Submitting Your Tax Forms
Once your tax forms are complete, you must submit them by the tax due date (typically April 15th unless specified otherwise by the IRS). You can e-file the forms directly through the IRS website, a tax software program, or mail them to the IRS.
If you opt for mailing, ensure to use certified mail so you have proof of submitting your taxes. Find the correct address based on the state you reside in from the IRS website’s ‘Where to File Paper Tax Returns’ page.
Remember, if you owe taxes, you must pay them at the time of filing, either through check, money order, credit/debit card, or directly from your bank account. Filing on time avoids unnecessary penalties.
Tax Deadlines and Penalties
Tax Deadlines for Gopuff Drivers
As a Gopuff driver, you are considered an independent contractor. Independent contractors are essentially self-employed and need to manage their own tax deductions. The annual tax deadline in United States is April 15th, unless it falls on a weekend or a public holiday, in which case, the deadline is the next working day. This is when your tax return for the previous year is due.
Estimated Tax Payments
Since self-employed individuals like Gopuff drivers don’t have an employer withholding taxes from their paychecks, they may be required to make quarterly estimated tax payments. These payments are due four times a year: April 15th, June 15th, September 15th, and January 15th of the following year. This is to cover income tax and self-employment tax obligations.
Penalties for Missing Tax Deadlines
If you fail to meet these deadlines, you could face various penalties. If you don’t make estimated tax payments and end up owing over $1,000 when you file your annual tax return, you might be charged a penalty by the IRS. The penalty is calculated separately for each installment due date, so you may owe a penalty for an earlier due date, even if you paid enough tax later to make up the underpayment.
If you file your annual tax return late and owe taxes, the IRS will usually charge interest and penalties. The late filing penalty is generally 5% of the unpaid taxes for each month or part of a month your return is late, up to a maximum of 25%.
Failure-to-pay penalty is usually 0.5% per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due.
How to Avoid Penalties
You can avoid the penalty for underpayment of estimated tax if you owe less than $1,000 in tax after subtracting withholdings and credits, or if you paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.
Remember, the best approach is always to follow the deadlines and make accurate estimated tax payments throughout the year. Consider consulting with a tax advisor to understand how best to manage your self-employed tax commitments.
The tax-related responsibilities of a Gopuff driver need not be overwhelming or burdensome. By understanding your taxable income, keeping a careful record of your business expenses, staying organized, and knowing how to complete and submit the necessary tax forms you can competently navigate through this process. Not to forget the importance of being mindful of tax deadlines and penalties, you can ensure you do not fall foul of IRS regulations, securing your financial success as a Gopuff driver. Hence, embracing these tax-related aspects will not only maintain your tax compliance but also boost your financial health by efficiently managing your taxable liability.