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Income Tax Returns For Delivery Drivers: Tips And Tricks

Income Tax Returns For Delivery Drivers: Tips And Tricks

As the on-demand economy grows, being a delivery driver can be a great way to earn money, full time, or as a part-time job. Whether you work for companies like Amazon, UPS, or a new app-based platform, being a courier means understanding the key facts to report your expenses accurately and on time.

Whether you are just starting or have been in the market for a while, the delivery profession has its nuances regarding tax reporting. Here are four steps to walk you through the process and ensure accuracy while maximizing your return.

Here's what you need to know about filing income tax returns for couriers.

Employee vs. Independent Contractor

How you report your earnings and whether you can deduct expenses depends on your status as an employee or independent contractor.

• Employees generally receive salaries, usually with income tax, social security, and health insurance deducted from their salaries. At the end of the year, they usually receive a W-2 form showing the income earned during the year and the total taxes withheld.

• In general, independent contractors are considered employees. The companies that hire them usually don't withhold income tax and pay on their payments. At the end of the year, they usually receive a 1099-MISC (or 1099-NEC from the fiscal year 2020) form, showing the year's total income.

If you are unsure whether you are an employee or a third party, talk to your employer.

Select The Appropriate Tax Forms.

Whether you are an independent contractor or an employee, you will use Form 1040 to file your tax return as a delivery driver.

  • If you are an employee, W-2 salary will appear on line 1 of Form 1040 and federal taxes withheld by your employer on line 17.

  • If you are using income tax software to prepare your income tax return, the software will automatically complete the income in the correct lines.

Independent contractors must attach a few additional programs to Form 1040.

  • You will generally use Schedule C to report your income as a delivery driver.

  • You will use Schedule SE to calculate the self-employment tax.

Take Advantage Of Tax Cancellations

If you are employed, you are unlikely to pay income tax on courier services. Your employer can cover or reimburse you for work-related expenses. However, independent contractors can usually deduct work-related expenses from Schedule C. 

Here are some common expenses you can deduct:

  • Bike and Accessories: If you deliver a bike instead of a car, you can usually recoup the repairs and necessary accessories.

  • Fees and Commissions: If you are running a delivery app and you are charged a fee, you can usually deduct the fees paid to the platform.

  • Mileage: It is essential to keep track of all kilometers driven for business purposes. By keeping accurate records, you can generally deduct the miles you drive to deliver and the miles you accumulate to collect supplies and conduct business operations.  Alternatively, you can use the actual expense method to deduct the portion of costs such as gasoline, repairs and maintenance, auto insurance, registration, and interest for the car loan or lease payments.

  • Mobile phone: Do you have a separate phone that you only use for drop shipments? You can deduct 100% of the cost of your phone and your monthly data plan. However, if you use your phone for business and personal use, you will need to split the deduction between business and personal use.

  • Parking and Taxes: In addition to your mileage, you can also deduct parking taxes and labor.

  • Provisions: Many couriers buy hot packs and blankets to hold deliveries of food, bags, phone chargers, panel mount systems, and other consumables. Providers like these are generally expense deductible.

  • Roadside assistance: Have you received a roadside assistance plan? You can deduct a percentage of your annual fee based on the percentage of miles traveled to get to work.

Estimate the Tax Payments

As an independent contractor, you are generally responsible for paying taxes. Usually, you don't have an employer to withhold them for you. Just like an employer withholds a portion of every payment, the IRS expects you to pay taxes while making money throughout the year.

    • If you expect to pay taxes of $ 1,000 or more, you should usually estimate the quarterly tax payment.

    • These payments generally expire on April 15 (July 15, 2020), June 15 (July 15, 2020), September 15, and January 15 of the following fiscal year.

    • If you miss a payment or pay late, you will be fined when you file your tax return.

Tips for submitting tax returns for couriers

If this is a lot of work for you, don't worry. You can use QuickBooks yourself to track your income and expenses and calculate your estimated tax payments. The software does the math for you and can also help you make an electronic payment to the IRS. Or you can consult an expert to help you out.


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