Do Uber Drivers Pay Social Security Tax?

Uber drivers often wonder about their tax obligations, especially concerning Social Security contributions. Uber drivers have Social Security tax obligations. Unlike traditional employees, Uber does not withhold these taxes from driver earnings. This responsibility falls directly on the driver, who is considered a self-employed individual by the Internal Revenue Service (IRS).

Understanding Driver Classification for Tax Purposes

The IRS classifies Uber drivers as independent contractors, not employees. This classification significantly impacts their tax responsibilities, differing from individuals who receive a W-2 form from an employer. As independent contractors, drivers are essentially operating their own small business in the eyes of the IRS.

Uber does not withhold income taxes, Social Security, or Medicare taxes from driver payments. Instead, drivers receive a Form 1099, such as a 1099-NEC or 1099-K, which reports their gross earnings. The responsibility for calculating and paying all applicable taxes rests solely with the driver.

Social Security and Medicare Taxes for Self-Employed Individuals

Self-Employment Tax (SE Tax) is the mechanism through which self-employed individuals contribute to Social Security and Medicare. This tax covers the same contributions that employees and employers typically split in a traditional employment setting. For self-employed individuals, the combined rate for SE Tax is 15.3% of their net earnings from self-employment.

This 15.3% rate is composed of two parts: 12.4% for Social Security, which funds old-age, survivors, and disability insurance, and 2.9% for Medicare, which covers hospital insurance. For 2024, the Social Security portion of the tax applies to the first $168,600 of combined wages, tips, and net earnings. The 2.9% Medicare portion applies to all net earnings from self-employment, without any income limit.

An additional Medicare tax of 0.9% may apply if net earnings from self-employment exceed certain thresholds, such as $200,000 for single filers or $250,000 for those filing jointly. The SE tax applies regardless of age, even if individuals are already receiving Social Security or Medicare benefits.

Calculating and Reporting Self-Employment Tax

Calculating Self-Employment Tax begins with determining your net earnings from self-employment. This involves subtracting all allowable business expenses from your gross income earned as an Uber driver. Accurate record-keeping of all income and expenses is essential for this calculation.

Deductible business expenses include:

• Vehicle mileage (either the standard IRS mileage rate, which is 67 cents per mile for 2024, or actual expenses like gas, oil, repairs, and insurance)
• Tolls
• Phone expenses related to business use
• Amenities provided to passengers

Once net earnings are determined, the amount subject to SE Tax is 92.35% of those net earnings. This adjustment accounts for the employer’s share of FICA taxes. The calculated SE Tax is then reported on Schedule SE. Self-employed individuals can deduct one-half of their total self-employment tax on Schedule 1, which reduces their adjusted gross income and overall income tax liability.

Estimated Tax Payments for Self-Employed Income

Since Uber does not withhold taxes from driver earnings, self-employed individuals are responsible for making estimated tax payments throughout the year. This “pay-as-you-go” system ensures that tax obligations are met as income is earned. Individuals must make estimated tax payments if they expect to owe at least $1,000 in tax for the year after accounting for any withholding or refundable credits.

Estimated tax payments are made quarterly, with specific due dates throughout the year. If a due date falls on a weekend or holiday, the deadline is extended to the next business day.

The typical due dates are:

• April 15 for income earned January 1 to March 31
• June 15 for income earned April 1 to May 31
• September 15 for income earned June 1 to August 31
• January 15 of the following year for income earned September 1 to December 31

Form 1040-ES is used to calculate and make these quarterly payments. Failure to pay enough tax through estimated payments or withholding can result in an underpayment penalty. The penalty calculation considers the amount of underpayment, the period it was due and unpaid, and published quarterly interest rates. Taxpayers can avoid this penalty if they pay at least 90% of the tax for the current year or 100% of the tax shown on their prior year’s return, whichever amount is smaller.