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|
To avoid the estimated tax penalty, you must pay one of the above percentages through a combination of estimated tax payments and withholding. Typically, you need to make four equal payments. If you have uneven income, you can use the annualized income installment method.
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|
*You can skip the final estimated tax payment if you file your tax return and pay your full balance due by February 1st.
What tax deductions can medical couriers claim?
As a medical courier, most of your tax deductions will be for car expenses.