Automatic extensions can give you up to six additional months to file your tax return. The extra time makes a big difference for many rideshare drivers. However, taking a few steps in advice can save you a lot of aggravation later. If you filed an automatic extension, these tax extension tips can help you prepare for the deadline.
Deduct Fees and Commissions
Some drivers receive Form 1099-K from their rideshare platforms. This form shows your gross earnings in Box 1a. However, it doesn’t include platform fees and commissions. Check your driver dashboard to ensure you reported the right totals to the IRS.Â
If you made over $600 in bonuses, you also might receive aÂ 1099-MISC form. Make sure you combine these earnings with the figures on your 1099-K to calculate your total income.
Report Every Payment
Incidentally, many people think that you can report all payments as one line item on your tax return. However, this causes a mismatch with the number your rideshare company reports to the IRS, so you could open yourself up to an IRS investigation into the discrepancy.
Track Your Mileage
Many of you are wondering if you should be tracking your miles or keeping track of your actual expenses. While it varies with each individual taxpayer, for most of you, the standard mileage rate will likely make more financial sense. Click here to see the latest standard mileage rates.
Your rideshare dashboard usually provides the number of miles you drove while on a trip. Remember to document your miles so you can justify the deduction. You need these mileage logs in case the IRS audits you.
Track Your Expenses
Keep track of all other ordinary and necessary expenses such as car washes, snacks for passengers, cell phone use, satellite radio subscriptions, trunk organizers, etc. The key here is ordinary and necessary. Things like cell phone use will have to be allocated between personal and business use.
Include Estimated Tax Payments
Some drivers need to make estimated tax payments. These quarterly payments directly reduce your tax liability. The IRS also assesses penalties for late payments, so stay on top of them. These payments are due on a quarterly basis throughout the year.
You should also know that tax extensions don’t apply to your tax bill. If you owe the IRS money, you have to pay it by the original tax deadline. If you don’t have the money, you need to request a payment plan BEFORE the deadline passes. For more information, check out ourÂ tax extension and payment plan guides.
Set up better habits for the next year. Organized records make tax time much easier and less time-consuming. Maintaining records throughout the year helps you better understand your business and simplifies the tax process.
Get Rideshare Tax Help Now
These tax extension tips are just a start. Shared Economy Tax specializes in taxes for rideshare drivers, so we can provide insights other tax firms can’t match. Get started today with a no-pressure consultation with one of our tax pros. You can also sign up for our complimentary tax tips newsletter using the form below.