Doordash 1099: What You Need to Know to File Your Taxes

As gig economy work grows, many individuals are navigating the complexities of tax filing for independent contractors. For DoorDash drivers, understanding how to file taxes correctly is crucial to avoid pitfalls and ensure compliance with IRS regulations.

The process involves several key components unique to self-employment, including tax forms, income thresholds, and deductions.

Which Form You May Receive

DoorDash drivers will likely receive a 1099-NEC form, which reports Nonemployee Compensation. This form is issued to independent contractors who earn at least $600 from a company during the tax year. The 1099-NEC replaced the 1099-MISC for reporting nonemployee compensation starting in 2020. It details the total amount paid to you by DoorDash, which must be reported on your tax return.

You might also receive a 1099-K form, typically issued by third-party payment processors like PayPal, if payments exceed $600, regardless of the number of transactions. If DoorDash uses a third-party payment processor to pay you, and your earnings meet this threshold, you may receive a 1099-K in addition to or instead of a 1099-NEC.

Meeting the Income Threshold

The IRS requires independent contractors to report all income, even if it falls below the threshold for receiving a 1099 form. Whether you earn $500 or $5,000, all earnings must be reported. The income threshold determines whether you receive a 1099-NEC or 1099-K but does not exempt you from reporting lower earnings.

For the 2024 tax year, the self-employment tax rate is 15.3%, covering Social Security (12.4%) and Medicare (2.9%) taxes. This rate applies to net earnings exceeding $400. Even without receiving a 1099 form, you must calculate and pay self-employment tax on net income above $400. Accurate recordkeeping of income and expenses is essential for proper reporting.

Self-Employment Tax Factors

As an independent contractor, you are responsible for both the employer and employee portions of Social Security and Medicare taxes, collectively known as the self-employment tax. IRS Form 1040 Schedule SE is used to calculate and report these taxes.

Self-employment tax is based on net earnings, calculated by subtracting business expenses from gross income. Only 92.35% of net earnings are subject to the 15.3% tax rate. For instance, if your net earnings are $10,000, only $9,235 would be taxed, resulting in a liability of about $1,412.

Making quarterly estimated tax payments is critical to avoid penalties for underpayment. These payments are typically due on April 15, June 15, September 15, and January 15 of the following year. Failing to make timely payments can result in penalties based on the amount underpaid and the duration of underpayment.

Deduction Possibilities

Maximizing deductions is key to managing tax liability as a DoorDash driver. The IRS allows independent contractors to deduct ordinary and necessary business expenses. Vehicle expenses often represent a significant deduction. Drivers can choose between the standard mileage rate—65.5 cents per mile for 2023—or actual vehicle expenses, such as gas, oil changes, and repairs.

Other deductible costs include phone bills, as smartphones are essential for managing deliveries. Keeping a log of business versus personal use can substantiate this deduction. Additionally, expenses like personal protective equipment related to health and safety may also be deducted.

Maintaining Accurate Records

Accurate recordkeeping is essential for tax compliance. Proper documentation supports deductions and provides a defense in case of an IRS audit. Digital tools like QuickBooks Self-Employed or Everlance can simplify tracking income and expenses. These apps often include mileage tracking and expense categorization.

It’s advisable to keep physical copies of receipts and invoices. IRS guidelines recommend retaining records for at least three years, but some records, such as those related to property or vehicle depreciation, should be kept longer—until the asset is sold or fully depreciated, plus additional years.

Combining Income from Multiple Platforms

Many gig workers earn income from multiple platforms, such as Uber, Grubhub, or Instacart, in addition to DoorDash. This requires careful financial management to ensure all earnings are reported. Each platform will issue its own tax documents, like the 1099-NEC or 1099-K, depending on income thresholds and payment methods.

When combining income, aggregate earnings and expenses from all sources to determine total taxable income. For instance, if using the same vehicle for multiple services, you can combine mileage or vehicle expenses while ensuring no double-counting. Managing combined income effectively helps optimize tax liability and ensures compliance with IRS regulations.