Sgt. 1st Class Daniel Weber works at the tax center on West Fort Bliss Feb. 21, 2019. The Fort Bliss Tax Center can assist ride-hailing service drivers with reporting money earned from their part-time driving venture. The tax center will open for the 2020 tax season, Jan. 22, 2020. (Photo by David Poe, USAG Fort Bliss)
 

Important tax information for ride-hailing service drivers

By Capt. Ingrid Babri, Fort Bliss Legal Assistance Office

Tax season is here, and if you are a part-time driver for a ride-hailing service, such as Uber or Lyft, you may be wondering whether you need to report money you made from that venture. 

The answer is: yes. 

As a ride-hailing service driver, you are not an employee of the company. You are treated as a self-employed, independent contractor. This means the company does not deduct taxes for you, and you are required to pay income and self-employment taxes on your earnings. Self-employment taxes include Social Security and Medicare taxes at the full 15.3 percent payroll rate for the net profit earned.

Since your taxes have not been drawn out for you proportionally, you are going to be paying all taxes owed at the end of the year. The tax liability will seem high because you are used to taxes being taken out of each paycheck, as is done with your Army wages. Additionally, you have added tax liability in the form of self-employment taxes. The Fort Bliss Legal Assistance Office has seen many clients who were earning money as part-time drivers and who were surprised to find out that they had to pay taxes on their earnings themselves, because they wrongfully assumed the car service was doing it. These clients ended up owing money to the government at the end of the year, which was very painful.  

Here’s how to prevent that from happening to you:  1) Be prepared to pay taxes. Either save or pay taxes throughout the year to avoid a large bill when you file taxes. You can use tax estimators to help estimate payments to make throughout the year. Google “Self-employment tax calculator” for resources; 2) Keep records of earnings. Your 1099 should provide you with the total amount you earned. The ride-hailing services only send you a 1099 if you earned more than $600. However, if you earned more than $400 from your ride-hailing business, then you must report that income to the IRS, regardless of having a 1099; and 3) Keep records of expenses. You can reduce your total tax liability by deducting expenses. Don’t rely on the car service to track these for you. Deductible expenses you may be able to claim include: costs of operating and maintaining  your vehicle, mileage, commissions and fees, automobile insurance, phone expenses, and supplies, such as air fresheners, waters for customers, etc. Save your receipts, because you could be audited by the IRS.  

 Keep your own records and be prepared to pay taxes. The Fort Bliss Tax Center can assist you with this and will prepare your taxes for free. Appointments can be made by phone at (915) 568-1040, in person at 2910 Cassidy Rd., or on Facebook at @fortblisstaxcenter.