What Happens If You Don’t Pay DoorDash Taxes?

As a DoorDash driver, you operate as an independent contractor, a classification that makes you a small business owner in the eyes of the Internal Revenue Service (IRS). This distinction means DoorDash does not withhold taxes from your earnings. Consequently, the responsibility for calculating and paying federal and state income taxes, as well as self-employment taxes, falls entirely on you. Failing to meet these obligations can initiate a series of escalating enforcement actions and penalties from the IRS.

IRS Identification of Unpaid Taxes

The Internal Revenue Service does not rely on self-reporting alone to ensure tax compliance. Its primary tool for identifying unreported income is an information-matching system that cross-references data from third-party payment processors with individual tax returns. This process begins when DoorDash issues a Form 1099-NEC to any driver who earns $600 or more during the calendar year, sending a copy to both the driver and the IRS.

When you file your personal income tax return, Form 1040, you are required to report this income on a Schedule C, Profit or Loss from Business. The IRS uses an automated program to compare the income figure reported by DoorDash on the 1099-NEC with the income you report.

If the system detects a discrepancy, it automatically flags your account. This mismatch triggers the first formal contact from the IRS, typically a CP2000 notice sent through the mail. This letter will propose a change to your tax liability based on the unreported income, marking the beginning of the collection and penalty process.

Initial Financial Penalties and Interest

Once the IRS identifies a tax deficiency, a series of financial penalties and interest charges begin to accrue. The three primary components are the failure-to-file penalty, the failure-to-pay penalty, and the interest charged on the outstanding balance.

If you neglect to file a tax return, the IRS imposes a failure-to-file penalty. This penalty is calculated at 5% of the unpaid taxes for each month or part of a month that the return is late.

A separate failure-to-pay penalty applies to the amount of tax that remains unpaid after the filing deadline. This penalty is 0.5% of the unpaid taxes for each month the tax remains outstanding. When both the failure-to-file and failure-to-pay penalties are applied in the same month, the total penalty is 5%, consisting of a 4.5% failure-to-file penalty and a 0.5% failure-to-pay penalty.

The failure-to-file penalty can reach a maximum of 25% of the unpaid tax, while the failure-to-pay penalty also accrues up to its own 25% maximum. This means the combined maximum penalty can reach 47.5% of your unpaid tax. On top of these penalties, the IRS charges interest on the underpayment and any accrued penalties, and this interest compounds daily.

Advanced IRS Collection Actions

If a taxpayer ignores the initial notices and accumulating penalties, the IRS will escalate its efforts to collect the debt. These advanced collection actions include the federal tax lien, the federal tax levy, and passport revocation.

A federal tax lien is a legal claim the government places on all your current and future property, including real estate, vehicles, and financial assets. To make the lien public, the IRS files a Notice of Federal Tax Lien, which alerts other creditors that the government has a priority claim on your assets and can damage your ability to obtain credit.

While a lien secures the government’s interest in your property, a federal tax levy is the actual seizure of that property. The IRS can levy financial assets without needing to go to court. This means it can legally order your bank to freeze your account and turn over funds to the IRS, and it can also garnish your wages or seize other income sources. The bank is required to hold levied funds for 21 days before sending them to the IRS, providing a short window to negotiate.

For taxpayers with “seriously delinquent tax debt,” the consequences can extend to international travel. In 2025, a tax debt is considered seriously delinquent if the total amount owed is more than $64,000. The IRS can certify this debt to the U.S. Department of State, which will generally deny an application for a new passport and can revoke an existing one until the tax issue is resolved.

Potential State-Level Consequences

Your tax obligations as a DoorDash driver are not limited to the federal government. The income you earn is also subject to taxation by the state in which you operate, provided that state has an income tax. State tax agencies have their own systems for identifying and collecting unpaid taxes, and their enforcement powers run parallel to those of the IRS.

If a state determines you have an unpaid tax liability, it will initiate its own collection process, complete with its own set of penalties and interest charges. State tax authorities can place a state tax lien on your property, which functions similarly to a federal lien by securing the state’s claim on your assets.

States are also empowered to issue their own levies, allowing them to seize funds directly from your bank accounts or garnish your wages. These actions are independent of any IRS proceedings, meaning you could face simultaneous collection efforts from both federal and state governments.

Possibility of Criminal Investigation

In the most extreme cases, the failure to pay taxes can transition from a civil matter to a criminal one. There is a distinction between simply being unable to pay your tax bill and actively trying to defraud the government. A criminal investigation is reserved for cases where the IRS suspects tax evasion.

The element that elevates a tax case to the criminal level is “willfulness.” This means the government must prove there was a voluntary, intentional violation of a known legal duty. A simple mistake or negligence is not enough to warrant criminal charges. Actions that can be interpreted as willful include using a false Social Security number or keeping a double set of books to conceal income.

If IRS Criminal Investigation pursues a case and secures a conviction for tax evasion under 26 U.S.C. § 7201, the penalties are severe. A conviction can result in fines of up to $100,000 for an individual, imprisonment for up to five years, and the costs of prosecution.