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