Once you get your driver's license, you can finally get around without help from your parents. If that isn't awesome enough, being able to drive also opens up new employment opportunities, such as being a delivery driver for a restaurant. What better way to polish your driving skills and earn some money at the same time?
A delivery service like DoorDash or Uber Eats won't take payroll taxes out of your check, though, so it can be a bit trickier to figure out how much you owe at tax time. Here's what you should know about taxes as a delivery driver.
What's My Employment Status as a Delivery Driver?
For tax purposes, there are two types of employees.
1. W-2 Employees
When you are a W-2 employee, you are employed by the company and get certain benefits — even if they don't seem like much:
Your employer must provide worker's compensation if you become injured on the job.
Your employer pays for one-half of the payroll taxes that are taken from your check.
Your employer has to pay you at least the federal minimum wage.
Your employer must abide by rules regarding breaks, overtime, and family and medical leave.
If you work directly for a restaurant, chances are you're a W-2 employee.
2. Independent Contractors (1099 Workers)
When you're an independent contractor, you agree to do jobs — often referred to as "gigs" — for the company in exchange for a set fee, but the company has no further responsibility to you:
You won't receive overtime or worker's compensation.
You'll have to pay 100% of your own payroll taxes.
Whatever you make per hour is the income you'll receive.
You can deduct some job expenses, like mileage, when you file your taxes.
Technically speaking, you are your own boss as an independent contractor. However, you'll still need to meet whatever conditions your employer sets. These may include a time frame within which the job has to be done and adherence to other professional standards of conduct.
Unless you are employed by the restaurant itself, and they are paying an hourly wage to deliver food, delivery drivers have independent contractor status. If you work for DoorDash or Uber Eats, you're an independent contractor.
What Is Payroll Tax?
When you retire, you'll receive Social Security payments based on how much money you earned in your lifetime. You'll also qualify for Medicare once you turn 65.
As an independent contractor, you're responsible for all of these taxes. Currently, you must pay 12.4% of your taxable income to Social Security and 2.9% of your taxable income to Medicare. You'll pay these taxes when you file your 1040 form.
What Do I Need to File My Taxes as an Independent Contractor?
1099-MISC forms. Independent contractors receive a 1099-MISC form that reports all the money the delivery service company paid you. Although employers are required by law to send these forms to independent contractors, they don't always do so. Even if you don't have a form, you must still report all the income you received.
A record of the tips you received. You'll also need to report your tips, as they are considered taxable income, so make sure to keep track of these.
A record of your expenses. As an independent contractor, you'll need to file a Schedule C along with your 1040 form. You'll report both your profits — the money you earned as a delivery driver — and the losses you incurred while doing this work. The main loss, or deduction, for delivery drivers is vehicle-related. You can either provide the IRS with a detailed list or take the standard mileage deduction, 58.5 cents per mile in 2022. To know how much you drive in a year, try a tracking app like Everlance or Stride.
Start Earning as a Delivery Driver
To earn money as a delivery driver, you'll have to get your license first. Aceable offers online, state-approved driver's ed courses that allow you to study for the exam from the comfort of home and at your own pace. Before you know it, you'll be earning enough money to fund your dream teenage lifestyle.