Understanding Tax on the DoorDash application may be needed by customers and dashers. For customers, they don’t need to pay the tax because the courier is an independent contractor and not their employee. For the Dasher, they need to pay estimated tax payments four times per year. You should understand how to pay Doordash tax correctly so that you avoid the consequences.
Working as an independent contractor gives you a lot of freedom, especially when it comes to scheduling. The thing is, it is a bit complicated when it comes to taxes. How to pay DoorDash tax? Here, we will explain some things regarding DoorDash and tax so you will have a better understanding.
What You Should Know about DoorDash Taxes
Before we proceed, there is something you need to know. As an independent contractor, you should know that your taxes are based on your profits and not your revenue. To make it clear, revenue is the money you earn, expenses are the money you spent, and profits are the leftover when you deduct expenses from revenue.
This can be complicated because you have to know what your expenses are and what are not. Your expenses are all the money you spent on things related to your job as a Dasher. For example, mileage, parking, tolls, phone and service, hot bags and courier backpacks, health insurance, merchandise, and uniform.
How to Pay Doordash Tax?
The first step is to pay your tax is to track your tax deductions. When you deliver as a Dasher, you use your own vehicle and spend your money on things like gas, maintenance, and others. You also use a phone for the app as well as other necessary resources, all of which are needed to do your job.
Those expenses can be deducted. Meaning, your tax liability can be reduced by tracking your deductions. Now the question is, what are these deductions? There are many of them. Below are some examples.
- Phone and Service
- Hot Bags and Courier Backpacks
- Health Insurance
- Merchandise and Uniform
Put it simply, these are the things you spend money for when you are doing your job as a Dasher. These are expenses you can write off.
Things like vehicle inspections, commission, and fees do not apply to DoorDash. DoorDash, like other food delivery companies, doesn’t require vehicle inspections. There are no commissions and fees, either. As such, you can’t include vehicle inspections, commission, and fees as deductions.
File DoorDash Taxes
Next is to file the taxes. How to pay DoorDash tax? You will need the following.
- Personal Information, such as your photo ID, Social Security number card, or Individual Taxpayer Identification Number card.
- Tax Documents, such as the 1099-misc form and last year’s tax return.
- Records of expenses and tax deductions, which include expenses that you want to claim as 1099 deductions.
After your federal return has been accepted, what you do next is track your refund. You can do this on the IRS website.
How Much to Pay DoorDash Taxes?
There is no fixed rule about this. That said, the rule of thumb is to set aside 30% to 40% of your profits to cover state and federal taxes. Again, keep in mind that your taxable income is the leftover of your revenue minus deductions. You have to deduct your revenue first.
Now you know how to pay DoorDash tax. DoorDash does not withhold any taxes from Dashers’ payment. After all, Dashers are considered independent contractors. This means if you are a Dasher, you are responsible for your own tax obligations. We hope our explanations above help.