Gig work is a double-edged sword. While you have the freedom to set your own hours, you’re also responsible for the administrative matters that a traditional employer would be responsible for, including setting aside money for taxes.
As a DoorDasher, you need to set aside 15.3% of your profit to pay taxes to the IRS.
How Much Should I Set Aside for Taxes on Doordash?
Taxes for Dashers can be complicated, because there are more rules to follow. Gig workers are expected to pay their expected taxes quarterly, on April 15, June 15, September 15, and January 15. Because of this, Dashers need to have a plan for saving money each month and aren’t hit with a large surprise come tax time.
Dashers should set aside 15.3% of their profits from DoorDash and any other gig work they do. It’s a good idea to do this automatically whenever you get paid. You can have a separate bank account specifically to keep this set-aside money, making it easier when tax time comes around.
How Much a Dasher Should Reserve Based on Earnings
Dashers need to reserve 15.3% of their profits for the IRS. You don’t want to scramble to pay taxes, risk an audit, or go into debt because you don’t have enough money. Here’s how much you should set aside for different levels of income.
$1,000 per year
People who earn $1,000 each year working as a Dasher should save 15.3% of their profits, or $153.
$5,000 per year
Dashers who earn $5,000 a year should plan to pay $765 in taxes, or 15.3% of that $5,000.
$10,000 per year
If you make $10,000 as a gig worker, you should save $1,530 to put towards taxes, representing 15.3% of your profits.
$20,000 per year
Gig workers, including DoorDashers, who earn $20,000 doing this work should plan to pay $3,060 in taxes, or 15.3% of their profits.
$50,000 per year
Finally, if you earn $50,000 as a Dasher, you’ll still pay 15.3% of that profit, which comes to $7,650.
DoorDash Taxes Breakdown
As you think ahead to the coming tax season, here is a breakdown of how taxes work for gig workers, including Dashers. This will help you file your paperwork with the IRS accurately, while minimizing the amount of money you need to pay.
Remember: as a DoorDasher, you are a small business owner, and are entitled to certain tax benefits.
Dasher taxes are based on profits
Gig workers pay taxes based on profits from their gig work. This is different than paying taxes based on income from a salaried job. As a gig worker, you take on more of the risks and have more costs. Dashers can deduct certain costs from their income to calculate their profits, so you don’t have to pay extra taxes on your expenses.
Common deductions for DoorDashers include mileage and cell phone data charges. In 2022, the mileage rate is 58.5 cents for businesses, including self-employed gig workers. Alternatively, you can deduct actual expenses, such as insurance, gas, and depreciation of your vehicle’s value.
Dashers pay income tax on profits
Income minus deductions is profit. As a self-employed gig worker, you’ll only pay taxes based on your profits. Allowing self-employed individuals to deduct business expenses from their taxes encourages them to invest, whether it’s in a new car or certification classes. Dashers don’t pay taxes on their ordinary business expenses and can deduct money they spend by using their own vehicle or a portion of their home for an office.
It’s important to keep accurate records of your income, deductions, and expenses, so you can accurately report these numbers to the IRS at tax time.
Dashers pay 15.3% self-employment tax on profit
Dashers are self-employed, so they will pay the 15.3% self-employment tax on their profit. This is a flat rate for gig work, so you’ll pay the same rate whether you earn $1,000 or $50,000 as a DoorDasher.
Dashers use IRS tax form 1040, known as Schedule C, to report their profit and business deductions. If you keep track of your earnings and expenses as you go, and set aside the 15.3% self-employment tax each month, you’ll be ahead of the game when it comes time to file your paperwork and pay your taxes to the IRS.
Dashers and IRS Tax Audits
If you’re a gig worker, it’s important to be careful on your tax forms. As an independent contractor, you’ll need to file Schedule C (Form 1040) with the IRS. People who file Schedule C are prime candidates for IRS audits, because many people may over-report their deductions and under-report their income. If your business income isn’t reported accurately, or if you don’t have the documents to support your claim, you may be at risk of an audit.
While the IRS isn’t malicious in their audits, they are invested in looking at the details of what you do, and don’t report. Tax Shark’s tax audit defense insurance can save you headaches by responding to any audit notices you receive and defending you in an audit.
Here are the answers to some common questions Dashers have about filing their taxes.
Yes. You have to file taxes and report all income you receive as an independent contractor, even if it’s less than $600 and you don’t get a 1099 form.
DoorDash will report the income of all its DoorDashers who earn more than $600 to the IRS. It will not report income from Dashers who earn less than $600.
DoorDash uses Stripe Express to prepare tax forms for Dashers. If you select the e-delivery option, you’ll receive your 1099-NEC by January 31.
You can file taxes yourself for your DoorDash gig work, if you are comfortable doing the paperwork yourself. If you’re worried about making a mistake, or dealing with the complicated forms, you can also hire a tax preparation firm like Tax Shark for the peace of mind of getting it right.