How to Pay Zero (or Close to Zero) Taxes Driving Uber & Lyft

John Thomas

Member
Many/most Uber/Lyft Drivers do no realize that they are subject to Federal, state, and local income taxes, along with 15.3% Self Employment tax. Almost all of the Uber/Lyft Drivers I run into that realize they have to pay these taxes wait until the end of the year to collect gas receipts, maintenance receipts, and other documentation that they think they can deduct, along with trying to calculate the amount of depreciation of their car they can deduct - all of this based on an estimated % of business use v. private use (which the IRS always will question).

If Uber/Lyft Drivers want to pay $0 (or close to it) taxes, all they need to do is set up an Excel spreadsheet with the following columns for daily amounts:
1) a) Beginning Mileage when you turn on your app - even if at home (zero based on your trip odometer at zero); b) Ending Mileage - when you turn off your app - even if that is arriving home (based on your ending trip odometer); c) Deductible Miles (same as b)); d) Tolls; e) Other Deductible Expenses.

2) Total Expenses (Deductible Miles x $.54 ($.575 in 2015) plus Tolls and plus Other Deductible Expenses)

3) a) Uber Revenue; b) Uber Tips; c) Lyft Revenue; d) Total Revenue.

4) Taxable Income/Loss (Total Revenue minus Total Expenses).


Taxable Income will almost always be near $0 or less. The IRS will rarely question a contemporaneously prepared document (Excel spread sheet or manual), while they will almost always question expenses and the allocation of such expenses between personal and business).

Note that:
1) The Standard Mileage Rate will almost always be more beneficial and questioned less by the IRS.
2) Other Expenses can include car washes (inside and out), drinks/snacks for passengers, cell phone allocation of business use, etc. (Note that the IRS will question the allocation).
3) Use Schedule C to list these revenues and expenses.
a) The 1099 will include revenue that you did not receive from Uber/Lyft ("Gross amount"), which you list on Line 1 of Schedule C.
b) List the total "Fees" from Uber/Lyft on Line 10 (the net of these two amounts should be the amount you received.
c) List the calculated car mileage expense and other non-maintenance car expenses on Line 9 and complete Schedule IV.
4) All miles driven from home (beginning work) to back to home (ending work) are arguably tax deductible. This includes miles to your first pick-up and "dead-end" miles.
a) This is substantially more than the miles provided by Uber/Lyft.
b) The miles driven from home to the first pick-up may be questioned; however these miles should be deductible as the pick-up is a "temporary" destination and not subject to the "business stop rule" where the first stop is considered a non-deductible commuting expense.
5) Make sure that the total miles deducted do not exceed the miles the IRS could calculate using other information - like recorded miles on oil changes, etc.

Since most Uber/Lyft Drivers are substituting short-term cash for long-term negative equity, it is important not to lose more money by paying taxes on this short-term cash.
 

Louisvilleuberguy

Active Member
First of all tips are taxable and are income as far as irs is concerned. I would claim tips mainly because something such as a return that has uber schedule c that has zero tips can be used as a red flag to audit. I owned multiple income preparation offices and have been doing business taxes for years.

Yes I understand that you can probably get away without including tips for many years but the one time your caught it will more than likely cost you more than that one year. It will probably cost you 3 years plus of taxes, interest and penalty. Plus when audited then everything can be examined In previous years and all deductions can get called into question.

I agree with original poster. You can do a spreadsheet or there are easy programs out there that you can track your expenses on. If your going to use a app or a website just be sure you understand what your doing.
 

Louisvilleuberguy

Active Member
It's hard to prove if you received tips but they don't have too to make your life miserable. They just have to do a full audit and during a full audit it's very hard in the majority of cases not to loose. They sit down initially with you and go over all your proof and the proof has to be in the format they want it. You can't bring in a shoebox of receipts because They will not accept that it needs to be electronic and organized. After first interview you then think your safe and out of the woods and tbey call in to meet with a supervisor and then the fun begins. Don't think for a second this will be fair because they will try to say deductions are not valid even though they are. There job is win. Vast majority of time taxpayers give up and just try to let the win be the least money as possible. Also during this process if they only audited you for one year they will send you notice that you now have to also prove the same thing on the previous 3 years worth of returns. They look at everything and normally find items you cannot prove. They know to hire someone is going to cost you so they figure you will agree to pay at least some no matter what to avoid hiring a professional.

So no maybe they cannot prove a cash tip but they can say if you reported no tips and worked all year that it is highly doubtful any driver works an entire year and gets no tips. In the end you don't want to go through the audit process. Hi honestly even with tips your more than likely in a loss situation.

So it's up to the oerson. For me I put down my tips. I have a complicated return with several businesses and I have been in the tax preparation business prior owning 8 stores. I've represented many a client who said the exact same things I'm hearing here about how the IRS cannot prove I made this income. Almost 100 percent of them who are audited wish they would of listened to me prior to filing those returns.

I could write a book with the stuff I have seen clients do and what I have seen the thugs at its do.
 
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Louisvilleuberguy

Active Member
I've seen them disallow a ton of mileage to a tax cab driver because she did not have every mile documented as far as starting point and ending point on every single ride.

Once again they audited a total of 4 years and eventually she gave in and paid them around 3k if I remember correctly. She had great records and it was a case of the IRS supervisor refusing to loose. She had to hire someone or pay the IRS and the IRS took payments. Plus they wore her out and scared her saying tbey could force her to pay much more but they were trying to work with her. No it was a fleecing.
 

renbutler

Well-Known Member
Why on earth would you declare uber tips?
I hear that a lot, and whoever asks the question has NO BUSINESS every calling anybody else cheap or questioning anybody else's integrity.

Just report your freakin' tips. It's easy, and it's the law.
 

MrA

Well-Known Member
What tips? maybe 1 out of 20 uber riders will tip, a buck or two. On the subject of taxes, do we, as drivers, have to pay into social Security, Medicare, state SDI, local income taxes, etc? WTF is left after uber fees, federal income taxes, state income taxes. I have a feeling i'm screwed come tax time.
 
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Gung-Ho

Well-Known Member
I approve of this comeback. :biggrin:

Really, though. Report your tips. Even if your conscience doesn't bother you, the tax expert's warning should.
With my taxi business tips usually run about 25% to 30% of meter. Some days even more. With the livery it's more like 15% to 20%. At tax time I salute the flag and be a good American and pay my fair share.

But with uber my tips this summer are about 1% to 2%. Frankly I'd be embarrassed to report them they're such a sad pathetic reminder of this useless endeavor.
 

renbutler

Well-Known Member
What tips? maybe 1 out of 20 uber riders will tip, a buck or two. On the subject of taxes, do we, as drivers, have to pay into social Security, Medicare, state SDI, local income taxes, etc? WTF is left after uber fees, federal income taxes, state income taxes. I have a feeling i'm screwed come tax time.
Wow, what's going on out there? I get tipped on 13% of trips, an average of about $7 per tip, raising my revenue by 5-8%. (To cut off any criticism from anywhere: No, I'm not bragging, because I don't do anything special beyond driving safely, knowing my way around, and being pleasant. Maybe it's a geographical/cultural thing.)

Anyway, just keep track of it and pay for it, even if it's a tiny amount. In fact, if it's tiny, it won't be much taxes at all -- so don't be cheap. Some of you guys make it sound like you're trying to justify tax cheating, even if it's at a very, very low level.

As for payroll taxes, you don't owe them unless your net profit after expenses comes to $400+ for the year (actually, $433.13 before the multiplier). Most people won't reach that because they use the standard mileage rate, despite the fact that their true profit is more than that using real-world mileage numbers.

Last year, I showed a net negative profit, but by driving smarter this year (XL rides and surge X only), I'm showing a taxable profit. But I'm going to try to keep the taxable profit under $433.13 to legally avoid payroll taxes. (I pay a lot of payroll taxes through my real job, so it's not like I'm paying nothing into the system.) BTW, my actual profit is already close to $1000, driving just a couple hours on most weekends only.
 

MrA

Well-Known Member
Thanks for the response, but, I'm not asking about payroll taxes. I'm asking about Social Security, Medicare taxes State Disability taxes. all the BS that is in addition to federal and state income tax. I've already driven more than on ce in San Francisco. now I'm supposed tp get a city business license that from what I'm reading, costs a few thousand dollars! AND, I got a red light camera ticket! Yea, Drive all day, and all night, get one red light ticket, all those fares turn to ZERO!
 

renbutler

Well-Known Member
Thanks for the response, but, I'm not asking about payroll taxes. I'm asking about Social Security, Medicare taxes ...
Social Security and Medicare ARE payroll taxes. They are taken out of (almost) everybody's paycheck at the same rate. So we were talking about the same thing.

https://en.wikipedia.org/wiki/Payroll_tax#United_States

So what I said applies to Social Security and Medicare.

I don't know anything about your particular disability tax though.
 
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Gung-Ho

Well-Known Member
Wow, what's going on out there? I get tipped on 13% of trips, an average of about $7 per tip, raising my revenue by 5-8%. (To cut off any criticism from anywhere: No, I'm not bragging, because I don't do anything special beyond driving safely, knowing my way around, and being pleasant. Maybe it's a geographical/cultural thing.)

Anyway, just keep track of it and pay for it, even if it's a tiny amount. In fact, if it's tiny, it won't be much taxes at all -- so don't be cheap. Some of you guys make it sound like you're trying to justify tax cheating, even if it's at a very, very low level.

As for payroll taxes, you don't owe them unless your net profit after expenses comes to $400+ for the year (actually, $433.13 before the multiplier). Most people won't reach that because they use the standard mileage rate, despite the fact that their true profit is more than that using real-world mileage numbers.

Last year, I showed a net negative profit, but by driving smarter this year (XL rides and surge X only), I'm showing a taxable profit. But I'm going to try to keep the taxable profit under $433.13 to legally avoid payroll taxes. (I pay a lot of payroll taxes through my real job, so it's not like I'm paying nothing into the system.) BTW, my actual profit is already close to $1000, driving just a couple hours on most weekends only.
I'm so disappointed in you. :frown: Here you are blasting away at people not reporting tips and yet you gleefully brag about how you game the system to not pay taxes. It matters not how much you pay at your "other " job there is no "I already pay enough amount" when it comes to the Great Old U. S.of A. Perhaps you should only declare your actual costs and pay your FAIR share. Shame shame shame. [sigh] I thought you were one of the good ones.:frown::frown::frown:
 

renbutler

Well-Known Member
Game the system? Gleefully brag? Surely you troll.

The IRS gives us this gift of 54 cents per mile. We all use it.

I can estimate that it costs 25 cents/mile to operate my Uber vehicle, but only a small portion of my driving is for Uber, so the true cost to operate the vehicle for Uber can only be an estimate. So I use exactly what the IRS says to use.

It's not gaming the system. It's following the law to the letter.

But I think you knew that.
 

Strange Fruit

Well-Known Member
Thanks for the response, but, I'm not asking about payroll taxes. I'm asking about Social Security, Medicare taxes State Disability taxes. all the BS that is in addition to federal and state income tax. I've already driven more than on ce in San Francisco. now I'm supposed tp get a city business license that from what I'm reading, costs a few thousand dollars! AND, I got a red light camera ticket! Yea, Drive all day, and all night, get one red light ticket, all those fares turn to ZERO!
It costs $91/year. It's difficult to find out how necessary it is (is it being enforced & when/where?), but they have "TNC driver" on the checklist of businesses, so they're definitely requiring it. No one seems to know for sure how serious it is. A couple weeks ago there was supposedly a crew of police checking all the drivers. Those are SFPD and they could have checked for the license. $91 seems worth not having to worry.

About the red light: exactly. I would change your habit towards yellow lights as I have done. 2&1/2 years with no red light tickets. Taking the chance of making it is usually a safe risk, but if you're on the road for hours doing this job, the risk goes up with more rolls of the dice. Better to get in the habit of slowing for yellows. Takes some will power at first, but eventually you just do it automatically. There will be another green in less than a minute.
 

Strange Fruit

Well-Known Member
Wow, what's going on out there? I get tipped on 13% of trips, an average of about $7 per tip, raising my revenue by 5-8%. (To cut off any criticism from anywhere: No, I'm not bragging, because I don't do anything special beyond driving safely, knowing my way around, and being pleasant. Maybe it's a geographical/cultural thing.)

As for payroll taxes, you don't owe them unless your net profit after expenses comes to $400+ for the year (actually, $433.13 before the multiplier). Most people won't reach that because they use the standard mileage rate, despite the fact that their true profit is more than that using real-world mileage numbers.

Last year, I showed a net negative profit, but by driving smarter this year (XL rides and surge X only), I'm showing a taxable profit. But I'm going to try to keep the taxable profit under $433.13 to legally avoid payroll taxes. (I pay a lot of payroll taxes through my real job, so it's not like I'm paying nothing into the system.) BTW, my actual profit is already close to $1000, driving just a couple hours on most weekends only.
Are you really saying $400 total per year? I know that's what you said, but it seems so small I can't help thinking I misunderstand. I'm totally ignorant regarding this, so forgive me if it's annoying to be questioned on what you already clearly wrote. I assume you meant that, since you say your actual profit is almost $1000, and only working a couple hours per week. $400 per year is profitable enough to pay payroll taxes?! It's not even enough to eat for the year. I assume most businesses don't function like an Uber driver, which is considered to be: "substituting short-term cash for long-term negative equity", technically meaning we profit less than $0 (if I understand the definition of "profit"). It seems strange that we need to pay any taxes on Uber income, if that statement is true. I haven't done the math to know if the statement is true, but it seems to be the common conclusion.
 
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