Required to File a Return?
In most cases, you will be required to file a Form 1040 and attach Schedule C and Schedule SE to report your earnings from being an Uber partner.
If you have net earnings (not gross) from Uber in excess of $400, you must file a federal tax return with Schedule C and Schedule SE attached. If you have less than $400 in income from Uber, but are otherwise required to file a tax return you must still file Schedule C regardless of the amount of your income.
If you are not otherwise required to file a tax return, but have net earnings (not gross) from Uber in excess of $400, you must file a full tax return including Schedule C and Schedule SE. On the other hand, if you are not otherwise required to file an income tax return and your net earnings from Uber is less than $400, you are not required to file Schedule C or an income tax return for that matter.
Where Your Income is Reported - Schedule C
As an Uber Partner you are considered to be self-employed, this is also referred to as being a "sole-proprietor." For tax purposes this is treated differently than being considered a common law employee.
Rather than reported as wages, your income along with your allowable expenses are reported on Schedule C of Form 1040. Being self-employed, rather than an employee means your allowable expenses directly offset your income from Uber and are not subject to an income limitation or requirement to itemize deductions.
The Self-Employment Tax - Schedule SE
Being self-employed means that your net income from your business (your business gross income after reduction for any allowable business deductions) is subject to the 15.3% self- employment tax consisting of Social Security and Medicare taxes imposed primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. This tax is calculated on Schedule SE of your tax return.
It is important to note that the 12.4% Social Security portion is limited by income thresholds, meaning you will not pay it on net earnings in excess of $118,500 for 2015. However, an additional amount of Medicare taxes will apply if your income for the year exceeds a much higher threshold.
State Income Tax
If you are required to file a federal income tax return in most cases you will be required to file a state income tax return as well.
However, nine states do not impose an income tax on individuals, they are: (1) Alaska; (2) Florida; (3) Nevada; (4) New Hampshire; (5) South Dakota; (6) Tennessee; (7) Texas; (8) Washington; and (9) Wyoming.
Furthermore, if you provide services in more than one state the income earned in that state will generally be taxable in each state, as well as your resident state. In most states, you will then receive a state tax credit on your resident return for the amount of income taxes paid to those other states.
Form 1099-K Income
Form 1099-K is used to report payments you received from riders. This includes gross fares in addition to the expenses that Uber paid for on the your behalf, which is broken down on the Tax Summary that Uber provides.
The amount shown on this form will exceed the actual amount of payments you received as Uber is required to include in the gross amount expenses that were paid on your behalf. The difference is then accounted for by taking deductions for those expenses on various lines of your Schedule C.
Form 1099-MISC Income
Form 1099-MISC is used to report items income you received directly from Uber, rather than from individual rider fares. Examples include incentive payments, driver referral payments, and "join and support" payments. Though these types of income are not received from riders as a fare, it is still considered a trade or business income from the activity. These items are taxable in the same manner as the income reported on Form 1099-K and can be reported on the same Schedule C.
Options for Reporting Vehicle Expenses
When you use a personal car as an Uber driver you may be able to deduct related expenses using one of two methods: the standard mileage rate method or the actual expense method.
In order to use the 2015 standard mileage rate of 57.5 cents per mile for a car, the taxpayer must choose to use that method in the first year the car is used in a business. Use of the business standard mileage rate is in lieu of claiming actual fixed and operating costs of using the auto for business. This means items such as depreciation, maintenance (including car washes), repairs, tires, fuel, oil, insurance, and registration fees are included in the mileage rate. However, using the standard mileage method generally can still separately deduct: tolls and parking fees, auto loan interest, and personal property taxes.
If you do not, or cannot, use the standard mileage method you will deduct the actual expenses of operating the car. These expenses include: depreciation; lease payments; registration fees and licenses; insurance; gas, oil, and repairs; garage rent; tires; and tolls and parking fees. The expenses for a car used for both personal and business purposes must be divided between the two uses. The expenses are prorated based on the miles driven for each purpose.
If you do not either own or lease the vehicle you must use the actual expense method to report vehicle expenses.
Also, if you operate 5 or more of cars in this activity you must use the actual expense method to report vehicle expenses.
Generally, an Uber driver's deductible mileage is subject to the business stop rule. Meaning, your mileage incurred driving from their residence to their first passenger pickup of the day is considered non-deductible personal commuting miles, even though you may not have a regular office location in the typical commuting sense. Any miles driven between that first business stop and subsequent business stops (referred to as "on-trip mileage" by Uber) is deductible. However, the trip from the your last drop-off point back to your residence is also considered nondeductible personal commuting mileage.
Expenses Subject to Allocation
When you use your personal auto to drive for Uber certain expenses must be allocated between business use and personal use. The amount deductible is based on a percentage generally calculated by dividing the total deductible miles for the activity by the total miles the vehicle was driven for all purposes during the year. Only the business portion of the following items of expense paid by a driver, or collected by Uber on the driver's behalf, can be deducted.
• Uber Fuel Card Fees
• Property Taxes
• Interest on Auto Loans
• Lease Payments
• Fuel, Oil, and Tires*
• Repairs and Maintenance (including car washes)*
• Registration and Tags*
*Expenses that are covered by the standard mileage rate, and therefore not deductible in addition to the amount deducted based on that rate.
The following items of expense paid by a driver, or collected by Uber on the driver's behalf, are fully deductible as a business expense.
• The Uber Fee
• Estimated Tax Payments
Individuals driving for Uber may be required to make estimated quarterly tax payments equal to 25% of your "required annual payment" to avoid penalties for underpayment. For most, the required annual payment individuals is the lower of 90% of the tax shown on your return or 100% of the tax shown on last year's return.
Most people who receive the bulk of their income in the form of wages satisfy these payment requirements through the tax withheld by their employer from their paycheck. Otherwise they can make additional payments via IRS Form 1040-ES or the IRS' online tax payment system.
As Uber issues Form 1099-K it is important that you make sure that you are meeting these quarterly tax payment obligations throughout the year as the form provides the IRS with a breakdown of the payments you receive on a month-to-month basis.