![]() The other bad news is that you must pay Social Security and Medicare taxes on that side hustle income, which totals 15.3% of what you earned after deductions.Īs a gig driver, your most significant delivery driver or rideshare tax deduction is your mileage. According to a blog post from our partner Keeper, How to Handle Taxes on Side Hustle Income, this applies whether you are a full-time gig driver, or if your gig driving is a side hustle in addition to a regular job. You must complete a Schedule C (Profit or Loss from Business–Sole Proprietorship) as part of your taxes. As a gig driver, you are a self-employed business owner.Īny time you get a paycheck that doesn’t have taxes deducted, you are in business for yourself and responsible for paying taxes on that income. Are gig drivers considered self-employed?Ībsolutely.So let’s dive right in and answer some of the more frequently asked questions about taxes for freelance work and gig driving. Keeper also helps gig workers file their taxes. Keeper helps gig workers and creator economy workers discover tax-deductible expenses. Gridwise has joined forces with Keeper to bring you little-known facts about gig-worker taxes. No one likes taxes, and as a self-employed gig driver, you almost invariably owe money to the government. By midnight on April 15, we all need to have our annual income taxes completed and submitted (April 15 falls on a Saturday this year, which means you have until midnight April 17, ensuring many will spend that final weekend frantically doing their taxes). You should consult your own tax, legal, and accounting advisors before filing your return. This material has been prepared for information purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. This is not an attempt to be rigorously accurate since not every state has an income tax, and different income brackets will correspond to slightly different tax rates.* Gridwise does not provide tax, legal, or accounting advice. This is an industry-standard generalization of 15% federal income tax, 7.5% social security and medicaid tax, and an additional 7.5% state income tax. A flat 30% effective tax rate on 1099 income was assumed.Subjects were not told what the study was about, to reduce selection bias. However, there was a monetary incentive that reduces volunteer bias, and users were not pre-screened outside of having at least $600 in gig work income during 2018. The study’s sample of 205 gig workers is not a trust random sample as there is selection bias in who chose to be part of the study. Key assumptions and generalizations made in the study include the below: The gig worker type groupings outlined in the findings are mapped using the nearest IRS job type categorization. ![]() It’s for 2016 tax returns, which is the latest data set available publically. This data set provides aggregate income, and deductions data, across various contractor segments in the US. The second data set used is Sole Proprietorship Statistics published by the IRS. Advertisements for the study were placed across craigslist postings in 16 major US cities. Study subjects were required to have earned at least $600 from 1099 contracting work in 2018 and were compensated $30 for participation. The study analyzes 2018 tax returns of 205 participants, alongside publicly available tax data from the IRS. Put in perspective, a side hustler earning three thousand dollars overpays by about $200 annually, and someone with independent contracting income of $25,000 per year overpays by an average of $1,550 every year.Īdditional cuts on the data, including overpayment by industry and which types of deductions were most commonly missed, below. Summaryīy analyzing the 2018 tax returns of 205 gig workers, the study found an average tax overpayment of 21%. Among this group of newly minted self-employed, there is widespread misunderstanding of tax laws resulting in significant overpayment to the IRS. ![]() Today, nearly a third of working Americans do so. The rise of freelance work marketplace economy platforms such as Doordash and Patreon has made it increasingly easy to earn flexible 1099 contracting income on the side. ![]()
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