In 2023, around 7 million people worked as gig drivers for DoorDash. It’s great for some extra cash, especially if you have spare time and a reliable vehicle.
Some people have found that being a Dasher is incredibly lucrative, but may not realize that a good chunk of their income may be eaten away by taxes. Unfortunately, if you work in the US, you must pay taxes, so it’s important to understand how they work before you start driving for DoorDash.
This article will give you a complete guide to DoorDash taxes so you know what to expect.
Is DoorDash Considered Self-Employment?
Yes, DoorDash is considered self-employment. More specifically, you’re considered an independent contractor rather than an employee. This means that you’re responsible for handling your own taxes.
Do DoorDash Drivers Need to Pay Taxes?
Yes, Dashers definitely need to pay taxes. Since you’re not an employee, taxes aren’t automatically withheld from your earnings.
One of the taxes you’re responsible for is self-employment tax. The current rate is 15.3% and it covers Social Security and Medicare taxes.
You also have to take care of federal income tax. This will vary based on your income and tax bracket.
Lastly, you have to pay state and local taxes too. Again, the rates will vary (depending on where you live).
Do note that if you expect to owe more than $1,000 in taxes, you’re required by the IRS to pay these estimated taxes quarterly on April 15th, June 15th, September 15th, and January 15th.
What Forms Do I Need to File as a DoorDash Driver?
First, if you’ve made over $600 in a year from DoorDash, they’ll send you Form 1099-NEC, which reports your total earnings in that year (the statement will actually come from the company Stripe). So if you were wondering about how to get your 1099 from DoorDash, rest easy knowing that they’ll automatically do so if you’re past that earning threshold.
Now, you may be asking, “Do I have to file taxes for DoorDash if I made less than $600?” While the company won’t send you a DoorDash 1099 if you made under that amount, you still have to report your earnings, so the answer is yes.
To file your taxes, you’ll need Schedule C (Form 1040). This form reports your business income and expenses.
Also, you’ll need Schedule SE (Form 1040), Self-Employment Tax. This form calculates your Social Security and Medicare taxes.
How to Reduce Your Tax Bill
The above might have you thinking, “Is DoorDash worth it after taxes?” It is, if you’re smart about your deductions.
The good news is that the IRS allows business deductions to lower your taxable income. Here are some examples:
- Mileage: Deduct standard mileage rate (67 cents per mile in 2024) or actual car expenses
- Car expenses: Gas, maintenance, insurance, depreciation
- Phone and internet: If you use these things for DoorDash
- Hot bags, phone mounts, other gear: Business-related supplies
- Tolls and parking: Only when necessary for deliveries
It might be chaotic to try and track these things by memory or pen and paper. So we recommend tracking your expenses with apps like Stride Tax, Everlance, or QuickBooks. With these things, you can log mileage and receipts.
Should You Set Up an LLC for Your DoorDash Business?
DoorDash doesn’t require you to have a limited liability company (LLC) to be a driver for them. However, there are huge benefits you can reap if you take the time to do so.
As you might’ve guessed from the name, an LLC offers you personal liability protection. This separates your personal and business assets so that if your company ever gets sued, your own finances aren’t at risk.
In addition, there are tax benefits. For example, you can elect S-corp status to save on self-employment tax.
An LLC status also makes you look more professional. As a result, it’ll open opportunities for business credit and deductions.
How to Set Up an LLC for DoorDash
To set up an LLC for DoorDash, you should choose a name that’s memorable and unique. Not only that, but it should comply with state requirements too. This usually means having a form of “LLC” at the end of the name.
Then, you’ll submit the formation documents to your Secretary of State. You can also have us do it, as we have a free business registration service (just pay the state fee).
Next, apply for an employer identification number (EIN), which is free from the IRS. You’ll need this for tax filing and a business bank account, which will keep your personal and business earnings separate for easier expense tracking.
It’s also important to choose how your LLC is taxed. By default, the IRS will treat your LLC as a sole proprietorship, where you’ll file Schedule C.
However, you can choose the S-corp tax election, which can save you money. This is doable by paying yourself a reasonable salary and reducing self-employment tax. Do note that with an S-corp or C-corp election, you won’t have a 1099.
If you’re unsure about anything, speak to a tax professional to see if this status will benefit you.
How to File Taxes as a DoorDash LLC Owner
If you feel daunted by LLC taxes, don’t be. Here are the easy steps to follow that’ll keep you compliant as a self-employed person.
Step 1
Gather your income and expense records. Download your 1099-NEC from Stripe and use your mileage log and receipts for deductions.
Step 2
Fill out your tax forms. These include:
- Schedule C: DoorDash income and expenses
- Schedule SE: Self-employment tax
- Form 1120S: For S-corp status
Step 3
Pay your quarterly estimated taxes if applicable. You can use Form 1040-ES to submit payments online via IRS Direct Pay or EFTPS.gov.
Step 4
File your taxes by April 15th, or you can extend it to October 15th. Your choices here include TurboTax, H&R Bloc, or another tax professional.
Be Clear on DoorDash Taxes
DoorDash taxes might seem complicated to think about, but once you read up on it, it’s really simple.
While you can keep being a Dasher as an independent contractor, you’ll benefit more from forming an LLC. There are many advantages and the tax situation isn’t much different, so it’s worth looking into, especially if you want to protect your personal assets.
Sign up with Business Anywhere today to use our free business registration service. You’ll get a year’s worth of registered agent service free too.
