Driving for a rideshare company can be a great way to earn some side income, and for many, this was their first year making income in the industry. For those who took on this new side (or full time!) gig this year, as we enter tax season, you may be wondering: “I Completed 30 Rideshares This Year. Am I Considered Self-Employed?”
Well, if you engage in any activity that earns income from either direct revenue (not a W2) or a 1099 source, you’re self-employed. The more important question is are you considered self-employed for tax purposes?
There are several situations under which either the IRS will consider you to be self-employed. There are at least four and we have outlined them here:
A $400 Threshold on Self-Employment Income
According to the IRS, you are required to file an income tax return if your net earnings from self-employment are $400 or more. That’s even if you have no income from any other source.
This is because of the self-employment tax. You are required to pay this tax anytime you have net income from self-employment of $400 or more. The tax is 15.3% of your net business income, in addition to regular income tax. You may even be responsible for paying the self-employment tax even if you owe no federal or state income tax.
The requirement has to do with net earnings, not total income. If you earned $700 in income from 30 rideshares but had $500 in expenses, your net earnings will only be $200. No return would be required from that activity alone. You may still have to file a tax return if you have other income sources.
You Receive a 1099 Form
If you receive a Form 1099 from the rideshare company, you will almost certainly need to file a tax return. The IRS requires a Form 1099 be filed by the payor any time fees to an individual are at least $600 total in one year.
If you receive a Form 1099 for something greater than $600, it will generally have to be reflected on your income tax return, just as is the case for a W2 and if you have the income, you may as well deduct business-related expenses against it like your mileage and snacks for your customers.
You Want to Claim a Tax-Deductible Loss
In a lot of cases, you may receive income from ridesharing but it’s more than offset by your expenses. If that’s the case, you would want to file as self-employed to claim a loss.
Let’s say you receive a 1099 reporting rideshare income of $1,500. But you also have $2,500 in business expenses against that income. That means you have a net loss of $1,000.
If you have other income, such as from a W2, you’ll want to file as self-employed so you can deduct that loss against the employment income you have.
All Income Received is Reportable
Despite some of the income thresholds listed above, any income you receive is reportable for Federal tax purposes. The safe course is always to declare any and all income and if it comes from rideshare work, then you’re self-employed and need to file as such.
Don’t worry about knowing all these tax laws. TurboTax Self-Employed will ask you simple questions about your business and give you the business deductions you deserve based on your answers. TurboTax Self-Employed industry-specific deduction feature can also uncover unique business deductions specific to your industry. You can also connect live via one-way video to a TurboTax Live CPA or Enrolled Agent to get your tax questions answered. The TurboTax Live CPA or Enrolled Agent can even review, sign, or file your tax return.