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As an independent contractor, income taxes are handled differently. And even more so, there are differences in which different groups of independent contractors complete their taxes. In this guide, we’ll explore taxes for delivery drivers.
Delivery drivers make up a large subset of independent contractors. What exactly are delivery drivers? Simply, they are contractors who transport goods to the customers, either directly from the client or from a third party. This often includes picking up and delivering packages. If you’re a member of this group, here is a crash course in everything you need to know about taxes:
Forms You Will Need
Independent contractors pay estimated taxes quarterly and also at the end of the year. At the beginning of the year (by January 31st), you should receive a 1099-MISC from your employers in which you earned more than $600 from. A 1099-MISC is the most typical, though some employers may use a 1099-K, which you can learn more about here.
If an employer fails to send you a 1099, you will still have to report this income on your tax return. If you earned less than $600, employers are not required to send you a 1099. However, you still must report this income as well. This income can be reported on a Schedule-C form.
Write-Off Your Expenses
Keeping track of all your business expenses is vital because you can write them off. This can significantly reduce your taxable income and save you a lot of money.
As a delivery driver, here are the most common expenses to write-off:
Car Expenses: If your car is your main form of transportation for your business, here are two ways to write off your car expenses:
Standard mileage rate: Using this method, you would multiply your business mileage by the IRS approved rate, which was $.56 in 2014. This rate includes gas, insurance, lease payments, maintenance, and depreciation.
Actual costs method: You could also use the actual costs methods, which would require you (as the name suggests) to calculate the actual costs to you. You would have to figure out the percentage used for business related activities vs. personal activities. Typically, people may choose this method if they feel it may save them money. However, it’s more complicated and the standard mileage rate is usually the way to go.
Other Forms of Transportation: Other common forms of transportation include bikes and motorcycles:
Bikes: Typically, many choose to write-off the total cost of the bike in the first year, due to the lower cost compared to vehicles. However, you can also write off the depreciated value over the year and write off any maintenance costs as well.
Motorcycles: If you use a motorcycle for business, you will have to use the actual costs method, as the standard mileage rate does not apply to this method of transportation.
Cell Phone: You can write off the portion of your cell phone bill that you use for business. Do this by multiplying the percentage you used for business by your total cell phone costs.
What else you need to know
Determining business expenses can be a matter of judgement. The IRS requires that expenses be ordinary and necessary to your business in order to qualify. For example, packaging supplies like tape and boxes might be necessary to safely transports goods without damage from one place to another. However, a subscription to Pandora would not be as it does not affect how successful you are at the job.
To learn more about taxes in relation to independent contractors and those that are self-employed, click here.