DoorDashers work hard to deliver food and groceries to their customers. What DoorDashers pay in taxes for their work is a part of the job, but it’s something that could easily slip through the cracks. 

There are a few things worth considering when it’s time to pay taxes. Tracking expenses can make claiming your deductions easier, and there are penalties for not paying taxes. Here’s what you should know about taxes for DoorDashers.

Does DoorDash Withhold Taxes for Drivers?

Doordash doesn’t withhold taxes for its drivers and considers them independent contractors. This means that as a DoorDash driver, you’ll file taxes and report income on your own.

What Tax Forms Will DoorDash Send Their Drivers?

Doordash will send eligible drivers one tax form: 1099-NEC. Only drivers who earned $600 or more in 2021 will receive their 1099-NEC. Doordash drivers who made less than $600 in 2021 won’t receive a 1099 form.

Common DoorDasher Tax Deductions:

There are six common DoorDasher tax deductions you may qualify for. 

It’s helpful to track expenses if you’re going to claim these tax deductions. The IRS requires that any deductible business expense be ordinary and necessary, and tracking your expenses allows you to determine deductions from your taxable income. 

A second requirement the IRS has to claim your tax deduction is documentation. You’ll need to record your expenses to prove that the expense was ordinary and necessary.

1. Mileage

You can deduct DoorDash mileage in one of two ways, by using actual expenses or standard mileage. In most situations, you can choose from either option.

There are a few scenarios in which you’ll choose either the actual expenses or standard mileage rate:

  • For business use during the first year of DoorDash, the IRS requires you to use the standard mileage option.
  • You may choose between actual expenses and standard mileage options after the first year of using your vehicle for business use.
  • You’ll use the standard mileage rate if you lease a vehicle for its entire lease period and renewals.

The standard mileage rate for 2021 is 56 cents per mile driven for business use, and you’ll determine business use costs to operate your vehicle for actual expenses. 

You can include the actual costs for: 

  • Gas
  • Insurance 
  • Oil and repairs
  • Registration fees
  • Tires

2. Health Insurance

Second, your health insurance costs are deductible. There are some requirements you’ll meet to receive this tax deduction:

As an independent contractor, you qualify for this deduction because of being self-employed. There are two other requirements for the health insurance deduction, and you must have a business profit, and you must also not receive health coverage from an employer or spouse.

3. Roadside Assistance

You may also receive a tax deduction for roadside assistance. Roadside assistance fees are tax-deductible, but only for the percentage used for work with DoorDash.

Figuring out the exact amount of roadside assistance may be confusing at first. To make things easier, just like tracking your miles, you can track the time you’ve used your roadside assistance for business use.

4. Equipment

Fourth, you can claim a deduction for your equipment used. As a DoorDasher, this can include courier backpacks, insulated bags, and insulated blankets. You’ll deduct your equipment used for business purposes.

5. Cell Phone Service

The fifth tax expense you can deduct as a DoorDasher is cell phone service. You’ll receive deductions not only for your cell phone and cell phone service but for your phone accessories too. 

You can claim deductions for phone accessories such as a car charger, cell phone holder, and other ordinary and necessary expenses.

Tracking your cell phone use to claim a tax deduction may be difficult. You can simplify the process by sorting through your phone records to determine the amount of data and phone calls used during work.

6. Parking Fees and Tolls

The final tax deduction you may qualify for is parking fees and tools. You may receive deductions for both portions, but you’ll need to consider a few things first.

You’re only able to deduct parking costs as you deliver meals. You can also deduct fees you pay for tolls, but only for tolls during work.  

What Happens If You Don’t File Your DoorDash Taxes?

There are two DoorDashers taxes to file with the IRS: federal income taxes and self-employment taxes. If you don’t file your DoorDashers taxes, there are multiple penalties that you’ll pay:

  • The IRS charges penalties for failure to file and failure to pay, and the Failure to File penalty applies if you don’t file your tax return by the due date.
  • The Failure to Pay penalty applies if you don’t pay taxes reported on your return by the due date or an approved extended due date.

If you have either a Failure to File or a Failure to Pay penalty, you’ll receive a notice or letter from the IRS. The total for either penalty will differ, and each penalty has a different maximum amount. The IRS also charges interest, which varies by penalty type, so you’ll want to ensure you avoid penalties if possible.

The penalty you’ll pay for Failure to File depends on how late you’ve filed your tax return and the total unpaid tax as of the original due date. The penalty is 5% of unpaid taxes for each month or part of a month that the tax return is late. There’s a maximum of 25% for this penalty.

The second penalty you’ll pay for not filing your DoorDash taxes is for Failure to Pay. The amount you’ll pay for the Failure to Pay fine is 0.5% of unpaid taxes for each month or part of a month that the tax remains unpaid. This penalty won’t exceed 25% of unpaid taxes.

It’s possible to have both a Failure to File Penalty and a Failure to Pay Penalty. If you have both penalties in the same month, the Failure to File Penalty will be reduced by the Failure to Pay amount applied each month. 

An Accountant Can Help You Maximize DoorDasher Tax Deductions

Paying taxes as a DoorDasher is a requirement, but you can receive tax deductions for your work. Tracking your expenses will make receiving deductions easier, which in turn helps maximize your deductions.

When you want to maximize your tax deductions, work with accountants to pay your DoorDashers taxes. Work with accountants at 1-800Accountant so that you’ll receive your maximum tax deduction.

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Written by Vincente Gomez

Vicente Gomez is a tax accountant for 1-800Accountant. He studied at Averett University where he received a double degree in accounting and ...