Everything Lyft Drivers Need to Know About Taxes
Introduction
Lyft drivers often find themselves confused about their tax obligations. With the growth in popularity of rideshare services, it’s important for drivers to understand their responsibilities when it comes to taxes. In this article, we’ll go over everything a Lyft driver needs to know about taxes so that they can avoid any unpleasant surprises come tax season.
Understanding Your Status as a Lyft Driver
The first thing that a Lyft driver needs to understand when it comes to taxes is their status as an independent contractor. This means that they are not an employee of Lyft, and therefore, are responsible for paying their own taxes. Because Lyft does not withhold taxes from a driver’s earnings, the responsibility falls entirely on the driver to keep track of their earnings and ensure that they pay the appropriate taxes.
Keeping Accurate Records
Keeping accurate records is one of the most crucial aspects of being a Lyft driver. The IRS requires all independent contractors to keep detailed records of their earnings and expenses throughout the year. These records should include the date and time of each ride, the fare earned for each ride, and any expenses incurred while driving such as gas, maintenance, and cleaning supplies. Keeping accurate records will not only help you track your earnings, but it will also make it easier to file your taxes when the time comes.
Understanding Business Expenses
As a Lyft driver, you are considered a small business owner, and therefore, you are eligible to deduct certain business expenses from your taxable income. These expenses may include things like gas, car maintenance, insurance, and even your cell phone bill if you use it to communicate with riders. It’s important to keep track of these expenses throughout the year so that you can deduct them when it comes time to file your taxes.
Filing Your Taxes
When it comes time to file your taxes, you will need to report your earnings and any deductions that you are eligible for on your tax return. You can use tax preparation software or hire a tax professional to help you file your taxes. Depending on your income, you may also be required to make quarterly estimated tax payments throughout the year.
Conclusion
In conclusion, being a Lyft driver comes with a unique set of tax responsibilities. It’s important to understand your status as an independent contractor, keep accurate records of your earnings and expenses, and take advantage of any deductions you may be eligible for. By staying organized and informed, you can avoid any unpleasant surprises come tax season.
