Do I Have to Claim DoorDash on My Taxes? A Comprehensive Guide for Drivers

As a DoorDash driver, you may be wondering if you need to report your earnings on your taxes. The answer is: it depends. The IRS considers DoorDash drivers as independent contractors, meaning you are responsible for paying your own taxes, including income tax, self-employment tax, and possibly state and local taxes.

What is an Independent Contractor?

An independent contractor is someone who provides services to a company but is not an employee. They are responsible for their own taxes, benefits, and expenses. DoorDash drivers meet the IRS criteria for being independent contractors as they:

• Set their own hours
• Can choose which orders to accept
• Provide their own vehicle and supplies
• Are not subject to DoorDash’s supervision or control

Why is This Important for Tax Purposes?

Understanding your independent contractor status is crucial for tax purposes. It means you are responsible for filing a Schedule C on your tax return to report your income and expenses. This means you are responsible for:

• Paying self-employment tax (Social Security and Medicare)
• Paying estimated taxes throughout the year
• Tracking your business expenses to deduct them from your income

Do You Have to Report DoorDash Earnings?

Yes, you must report all your DoorDash earnings on your tax return. DoorDash issues a Form 1099-NEC to all drivers who earned $600 or more in a calendar year, summarizing your earnings. This form is a tax document that lists your earnings, which you will need to file your taxes.

What Expenses Can DoorDash Drivers Deduct?

As an independent contractor, you can deduct certain expenses related to your DoorDash driving business. This can significantly reduce your taxable income. Here are some common deductible expenses:

• Vehicle Expenses: This is typically the largest deduction for DoorDash drivers. You can deduct a portion of your vehicle’s expenses, including gas, maintenance, insurance, depreciation, and even car payments. There are two methods for calculating these deductions: the standard mileage rate and the actual expenses method.
• Mileage: You can deduct a standard mileage rate per business mile driven. The IRS sets the rate annually. For 2023, the standard mileage rate is 65.5 cents per mile.
• Actual Expenses: You can deduct the actual costs of your vehicle expenses if you choose not to use the standard mileage rate. This method requires detailed records, but it could result in larger deductions.
• Tolls and Parking: Any tolls you pay while driving for DoorDash, as well as parking fees, are deductible expenses.
• Phone and Internet: A portion of your phone and internet costs related to your DoorDash driving business is deductible. You’ll need to keep track of your business usage.
• Supplies: You can deduct the cost of any supplies you use for DoorDash, such as bags, cleaning supplies, and phone chargers.
• Insurance: You can deduct the portion of your auto insurance that is specific to your DoorDash driving business.
• Other Expenses: You may be able to deduct other expenses, such as bank fees, accounting fees, and legal fees.

How to Track Your Expenses

Accurate record-keeping is crucial for maximizing your deductions. Here are some methods to track your expenses:

• Mileage Tracking App: Use a mileage tracking app to automatically record your miles for business purposes. Popular apps include MileIQ, Stride, and Hurdlr.
• Spreadsheet: Use a spreadsheet to manually track your expenses, including dates, amounts, and descriptions.
• Receipt Organization: Keep all receipts organized, either digitally or in a physical file. Make sure to save receipts for all expenses related to your DoorDash driving business.

How to Pay Your Taxes

As a DoorDash driver, you are responsible for paying estimated taxes throughout the year. Here’s what you need to know:

• Estimated Taxes: The IRS requires independent contractors to pay estimated taxes four times a year through Form 1040-ES. These payments ensure you are paying taxes on your income throughout the year, avoiding penalties.
• Tax Withholding: If you do not pay estimated taxes, you may owe a penalty at the end of the tax year. You can also have taxes withheld from your DoorDash earnings by updating your account settings. This helps reduce your tax liability at the end of the year.
• Tax Filing: You will file your taxes annually with the IRS. You will need to file Form 1040, including Schedule C to report your income and expenses from DoorDash.

How to Avoid Tax Penalties

To avoid penalties, it’s important to follow these steps:

• File Your Taxes on Time: File your tax return by the April 15th deadline each year.
• Pay Your Taxes on Time: Pay your taxes by the April 15th deadline each year.
• Pay Estimated Taxes: Pay estimated taxes throughout the year if you anticipate owing taxes. You can also withhold taxes from your DoorDash earnings to help reduce your tax liability.
• Keep Accurate Records: Maintain accurate records of your income and expenses. This will help you file your taxes accurately and avoid penalties.

Conclusion

Reporting your DoorDash earnings and claiming deductible expenses is essential for any DoorDash driver. By understanding your tax obligations and taking proactive steps, you can ensure accurate tax filing and avoid penalties. If you have questions, consider consulting with a tax professional for personalized advice.