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Being a self-employed DoorDash driver has its own perquisites. You are always out and about on the road, nobody is looking over your shoulder, and you can work as per your schedule. However, with all the independence also comes the stress of filing income tax returns, from expense tracking to quarterly payments and figuring out DoorDash tax write-offs; the list of tasks needed to be completed during the tax season is gigantic. However, a little knowledge goes a long way, and this article will help all DoorDash drivers navigate their taxation trajectories. So, if you are one of them, read ahead.
DOES DOORDASH WITHHOLD TAXES?
DoorDash drivers are not employees; thus, payroll taxes are not withheld from drivers' salaries by DoorDash. The opposite is true for Dashers; they receive full payment for their services and are responsible for filing tax paperwork with the Internal Revenue Service. Although the absence of tax witholding appears like a lot of hassle; it is a blessing in disguise as DoorDash drivers are essentially running their own one-person business and will be able to discount business expenses to lower their taxable income. The gross earnings from DoorDash are listed on IRS Form 1099-NEC as non-employee compensation. It is noteworthy to remember that companies are only required to issue 1099 if the contractor has done more than USD 600 worth of work. Now that we have touched upon the topic of DoorDash tax write-offs let us hunker down on its details.
TOP EIGHT DOORDASH TAX WRITE-OFFS THAT YOU SHOULD BE AWARE OF
DoorDash drivers can use Schedule C of IRS Form 1040 to write off their business expenses for deductions.
Mileage – It is imperative that you keep tracking your work-related mileage as it is a significant deduction with a lot of potential. The standard mileage rate is USD 0.56 per month, intended to reflect the cost of gas, maintenance, carload, insurance, and even depreciation.
Tolls – Another substantial DoorDash tax write-off is the toll tax, as DoorDash does not reimburse for tolls. Consider getting an electronic card and linking it to the card you use exclusively for DoorDash spending if you live in a region where toll roads are popular.
Cell Phone – A cellphone is a DoorDashers's best friend, as all work-related occurrences are communicated through it. You can deduct that portion of your cell phone bill, which you dedicatedly use for business purposes, such as talking with customers, taking orders from the restaurant, and much more. To keep confusion at bay, you can opt for a separate cell phone for business purposes.
Parking – It goes without saying that parking your vehicle is a fundamental part of being a DoorDash driver. Although it may seem useless to maintain all the parking expenses, they culminate and become a considerable amount at the end of the year. Thus, the parking fee is another DoorDash tax write-off for all Doordashers.
Repairs – If you look back on one calendar year and realize that you had to invest a lot of money and time into repairing the vehicle you use for business, you can consider giving up the standard mileage deduction in favor of the expenses incurred on repairs. In this case, you must add your gas, car insurance, and vehicle depreciation.
Health Insurance – To what extent do you, as a DoorDash driver, foot the bill for your own medical coverage? If so, you'll be glad to know that medical insurance premiums may be deducted from your taxable income. Medical insurance is a legitimate business expense for companies who offer it to their employees. However, you should know about some conditions prior to opting for a health insurance deduction. For example, you are not eligible for a health insurance write-off if you qualify to receive health insurance from your spouse or parent.
Retirement Contributions – If you are a self-employed DoorDasher with a tax-deferred retirement plan, such as a Solo 401 (k), the money you put into that account is also tax deductible.
Insulated Courier Bags – The last major DoorDash tax write-off is the expense of buying insulated courier bags. Unlike working in a restaurant where they usually supply insulated courier bags to keep the food warm, the opposite is true for DoorDash. Although courier bags are not too expensive, they can add up, and you could be looking at a USD 100 investment. Thus, you should not hesitate to write these off as a business expenses.
So, there we have it, the top eight DoorDash tax write-offs that everyone should know about.
HOW CAN AI-POWERED FINANCIAL TOOLS HELP DOOR DASHERS?
As a DoorDash driver, you are a self-employed individual responsible for your taxes. However, filing returns is as overwhelming as it can get, especially for a 1099-NEC worker. In addition, the plethora of DoorDash tax write-offs further complicates the issue. However, with AI-powered financial tools like Flyfin's Tax Deductions Calculator, all your taxation worries will vanish. By efficiently compiling a list of your eligible deductions, Flyfin's calculator will ensure that you do not have to fret about your taxes.
Also Read - Itemized Tax Deduction Guide for 2022
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Part of the Science Fiction collection
Updated on September 26, 2022
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