If you’re anything like me, you look at these titles on websites proclaiming this or that about taxes and click on them...only to be more confused than what you were to begin with.
I have a confession. I’m not a tax professional, but I’m going to approach the subject as a driver (which I am) hopefully leading to a less murky view of the gig drivers responsibilities and benefits as I know them, not as a tax pro talking to you.
Abraham Lincoln said: A man who represents himself, has a fool for a client.This is not a bad guiding principal when it comes to a few big things on the short list in life. Law, taxes, and medicine are at the top of that list. I do not do my own taxes, operate on myself, or stand in court and run my mouth. And I don’t believe you should either. That being said, you wanna go there, then go on with your bad self. If not, read on.
As for me, I use H&R Block. Old fashioned? Maybe. But there is a damned good reason why. I use big, well known companies for these three things, because if something goes wrong I can sue them, and big law firms know they will have the resources to pay. Pro-tip, if you use H&R Block, always make sure to pay the extra $30 for their Peace of Mind coverage. Just in case of an audit they represent you, then you sue them.
There is one caveat tied to that. I am basically an honest person. I don’t want problems with any of these topics and it doesn’t pay to be dishonest about things so critical to living a trouble free life. So be honest with those you are paying to help you.
The first, and most important thing you can do as a gig driver, is to make sure you’re treating your job as a business, because I assure you the IRS is. The first step in doing that is tracking your mileage. There is no other single thing you can do in this business to give yourself a bigger tax break. Make sure you’re using a tool like one I have listed on my site to have a record of your mileage and not just something you guess at.
If you’re doing this as a full-time business, then you also might want to take advantage of health insurance, as certain aspects of it are tax deductible as well.
You may need to do quarterly taxes, but I haven’t had to do that in the years since I owned a restaurant - because I have been able to offset any of those by utilizing all my tax deductions. If you are only doing the work part-time and also have another job where you already have withholding taxes, then you probably don’t have to worry about it either. I only bring quarterly taxes up because it is more costly to do than file once a year.
Designate one credit card to record all expenses associated with your business. Anything outside of rent, food, personal loans (unless it’s for business in which you’re sole proprietor), Netflix, snacks and so on. If you designate that one card to cover all your expenses then it eliminates trouble or confusion and saves time at the end of the year.
You don’t neccesarily need any special designation like LLC if you don’t want to use it because you’re filing as yourself anyway, And the type of protection you get for the trouble may not be worth it…and often isn’t.
Was that too easy? It’s much easier when you’re not dealing in generalities and you’re focusing on one type of job. Again, I don’t know a lot of business owners that do their own taxes, they’re too busy running their businesses and tax law gets more complicated every year. Be honest with your expenses and keep good records. Then sit down with your tax pro and spend an hour or two answering their questions and you might actually be surprised at how easy and painless the process can be.
Remember it this way. Your job is to collect the info and report it. The preparers job is to organize and prepare the information for the IRS and your state tax authority. In the meantime you have free money that isn’t being tied up with an employer or the IRS. You can put it in something safe like a CD or whatever you wish while you're waiting on April !5th to turn your portion of taxes (after deductions) over to the feds.