You are not an employee. You are an Independent Contractor. I assume that some Uber Drivers may not know the importance of this information.
What does it mean:
Being an Independent Contractor means you can come and go as you wish, working when and where you want to. It means you are your own boss. It means you can hire people to work for you, rent and/or lease your vehicles to other drivers, and expand your contract with Uber to include multiple drivers and vehicles. You can even offer your services to others. A financially secure individual with adequate resources could find himself managing a fleet of vehicles and drivers contracted to Uber should that be their desire. (All of the preceding is true, if done within the provisions of your contract with Uber.)
But, with all this opportunity comes a responsibility many may not yet understand. As an Independent Contractor you are REQUIRED to do things like maintain Workman’s Comp Insurance and pay the applicable taxation. Some may believe that making 5k per month is a tax free enterprise because Uber does not deduct taxes from your pay. Sorry MaGoo but that ain’t true, the taxes are all on YOU.
I am not a Tax Service, an Attorney, or anybody official that is qualified or certified to advise others on this topic, so I suggest that you consult your local Tax Person and ask what you need to do, before it catches up and takes a bite out of you. IRS Agents know you are out here and are just waiting for an opportunity to audit you. So, what should you do?
Keeping in mind the fact that I have already told you that I lack the credentials to advise you on this topic, I suggest that you do at least the following:
- Keep accurate financial records
- This means maintaining vehicle logs and income/expense records
This is where you learn that 5k per month is significantly less at the end of the day. Out of your 5k per month earnings you are responsible for your vehicle fuel, maintenance, insurance, and cleanliness. Okay you may think no big deal but total these expenses alone and see what you get?
- Fuel 40.00 per day, 22 days per month = $880.00
- Maintenance Oil Changes 50.00 to 75.00 every two months (450.00), tune ups every three months (800.00), & tires twice per year (1,000.00) = up to $2250.00 per month.
- Tolls (unpaid by Uber) 22 per month = up to $110.00 per month.
- Guess what, it now costs you $3240.00 per month to drive for Uber.
Now my expense may be a little on the high side, but you understand now that nobody gets a free ride. Every mile you drive costs you in one way or another. But wait, there is more . . .
As an Independent Contractor you are required to pay your own income taxation. If you file your taxes as an Independent Contractor you will likely have to pay 22% taxation on your income. As an Independent Contractor with your own employees, you also have to pay a portion of their taxation as well as workman’s Comp Insurance. Based on what is left over from the 5k noted above:
- Taxable income of 1760.00 @ 22% = $387.20
- You now have a take home pay of $1372.80
Now do not go getting your panties all in a knot, you can still make good money driving for Uber. But to do so, you have to maintain the required records to properly reduce the amount of taxes you have to pay. One of the records you need to maintain is a vehicle mileage and expense log. You get to write off a good portion of your driving mileage against your taxes. Maintain a log of each and every mile you drive for Uber. You also get to write off most of your expenses for your vehicle. Again, maintain a log of all your vehicle expenses. Include every expense for your vehicle.
And, what is the end result? By my own math, I hope I am wrong because we are not making enough to pay my car payment and eat mac n cheese more than a few times per month. Shit, I must have an error in my calcs, it cannot be this bad. I have a car note of close to $1,000.00 per month and insurance of $225.00 per month. $1372.80 – $1220.00 = $152.00 per month. Holy Shit! I must be doing something wrong . . . I’ll get back to you on this in a day or two. I gotta find somebody that knows how to use a calculator properly.
(Now that I have everybody in a panic in the event my figures are accurate . . . DO NOT PANIC, I am probably wrong.)
Okay, found the error. I calculated the yearly expenses as monthly at $2250.00 per month instead of continuing the math to demonstrate your monthly costs as $187.50 per month. So, what have you learned from this article?
- That you are a business if you are a Uber Independent Contractor
- That you have expenses and have to pay taxes,
- And, that you should seek the advice of a Tax Professional instead of me to tell you how to handle this.
Any questions? Do not ask me, call a Tax Professional!