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Mileage, depreciation: IC vs Employee

WAHN

Well-Known Member
Since the whole CA bill has people dreaming of earning a livable wage by being deemed an employee, I'm just curious about the tax implications of such a declaration.

As it stands now, we can write off standard mileage or claim actual vehicle expenses from our IC earnings.

As an employee being paid whatever wage and being reimbursed for mileage, wouldn't that possibly go away.

If/when the CA bill passes, are they going to need to rewrite the mileage reimbursement tax laws with a special gig app section?

From what I've read, depending on how an employer reimburses you for mileage, you may or may not be able to deduct mileage on your taxes.


Just curious as to how people believe this would work.

I'm not personally familiar with any jobs where your personal vehicle is used as much as it is in this gig.
 

Wrb06wrx

Well-Known Member
Oh I think it will pass the liberal California government I think that this will destroy whatever easy money that the rideshare gig has been providing and you will just get the idiots who have no idea of surge or making actual money happily pounding their brandy new cars into the ground for less than pennies
While those of us who have been around trying to make a couple bucks will move on to the next side hustle
 

Seamus

Well-Known Member
Exactly an issue many who aren't familiar with taxes don't even think off. People who never itemized their personal taxes on schedule A probably dont even realize that the 2018 tax changes could have a major impact.

If you are an IC you do your taxes and write off your mileage on schedule C as a business. If you are an employee of a company on your personal income taxes prior to 2018 you wrote off UNREIMBURSED business expenses on schedule A. Those have been severely reduced beginning in 2018.

Interesting question.
 

Stevie The magic Unicorn

Well-Known Member
Exactly an issue many who aren't familiar with taxes don't even think off. People who never itemized their personal taxes on schedule A probably dont even realize that the 2018 tax changes could have a major impact.

If you are an IC you do your taxes and write off your mileage on schedule C as a business. If you are an employee of a company on your personal income taxes prior to 2018 you wrote off UNREIMBURSED business expenses on schedule A. Those have been severely reduced beginning in 2018.

Interesting question.
Something you need to keep in mind, because uber is paying for mileage (specifically listed on the rate cards) this *should* count as mileage reimbursement, as apposed to pay.

Mileage reimbursement is not taxable!

THe waybill breaks down our reimbursement into multiple segments.

Mileage
time
Surge
Bonuses ect.


There's 3 things that must be done,

For reimbursement payments to be exempt from payroll and income taxes, the payments must be made under an accountable plan. To be deemed accountable, an employer’s reimbursement plan must satisfy three rules. First, the expenses reimbursed must have a business connection. Second, the employee must adequately account for the expenses within a reasonable period of time. Third, the employee must return any excess reimbursement within a reasonable period of time.


Basically if you were an "employee" you would need.

A. A mileage log, (this satisfies rules 1-2)
B. Make sure your total miles driven times .58 is enough to hit your total mileage pay. At the extremes this would be Orlando needing a 0% paid mileage ratio and for Seattle at the other extreme no more than 50% of your miles would need to be paid.

Basically the math would work out as...

*orlando*

53c a mile <58c per mile = no actions or fancy math is needed

Seattle

$1.10 > Your total mileage pay (only the mileage portion) would have to come in under your deductible miles.

So with a 50% paid mileage ratio, even in Seattle you could write off the entirety of your per mile pay portion.

Since surge is listed separately that's not a mileage reimbursement.

Your taxes WOULD go up but simply stated, your "mileage" portion of your waybill would be non-taxable even at the extreme example of Seattle. (i'm also pretty sure seattle drivers have a taxable profit now)


And for the record, time, surge, and incentives would be taxable.


Also interestingly...

Mileage pay wouldn't count towards min wage.
 

FLKeys

Well-Known Member
I would think if you become an employee you can kiss good buy and mileage amount over what the IRS permits. So in therory everyone in that state would get 58¢ per mile this year, and any additional money would come from time to meet what ever minimum wage requirements are set.

How does NY handle it, arn't they employees?
 

Seamus

Well-Known Member
I would think if you become an employee you can kiss good buy and mileage amount over what the IRS permits. So in therory everyone in that state would get 58¢ per mile this year, and any additional money would come from time to meet what ever minimum wage requirements are set.

How does NY handle it, arn't they employees?
No, IC still.
 

Launchpad McQuack

Well-Known Member
If you are an employee of a company on your personal income taxes prior to 2018 you wrote off UNREIMBURSED business expenses on schedule A. Those have been severely reduced beginning in 2018.
As far as I know, the deduction for unreimbursed employee business expenses was entirely eliminated in 2018.
 

Seamus

Well-Known Member
As far as I know, the deduction for unreimbursed employee business expenses was entirely eliminated in 2018.
For all intent and purposes, yes. There is a very limited, narrow, specific circumstance that is allowable. I forget what it was because it wouldn't apply to 99.99% of the population.
 

UberTaxPro

Well-Known Member
Past Sponsor
As far as I know, the deduction for unreimbursed employee business expenses was entirely eliminated in 2018.
The only exception I can think of is teachers get up to $250 of non-reimbursed expenses. In the past they could deduct the amount over 250 if they itemized but that is history also.
 

Asificarewhatyoudontthink

Well-Known Member
Since the whole CA bill has people dreaming of earning a livable wage by being deemed an employee, I'm just curious about the tax implications of such a declaration.

As it stands now, we can write off standard mileage or claim actual vehicle expenses from our IC earnings.

As an employee being paid whatever wage and being reimbursed for mileage, wouldn't that possibly go away.

If/when the CA bill passes, are they going to need to rewrite the mileage reimbursement tax laws with a special gig app section?

From what I've read, depending on how an employer reimburses you for mileage, you may or may not be able to deduct mileage on your taxes.


Just curious as to how people believe this would work.

I'm not personally familiar with any jobs where your personal vehicle is used as much as it is in this gig.
As an employee you would still be able to declare your mileage...but, Uber would be required to withhold taxes from your earnings which, if your total earnings minus your legal deductions was less than the taxed amount, you would get a return.
 

UberTaxPro

Well-Known Member
Past Sponsor
Since the whole CA bill has people dreaming of earning a livable wage by being deemed an employee, I'm just curious about the tax implications of such a declaration.

As it stands now, we can write off standard mileage or claim actual vehicle expenses from our IC earnings.

As an employee being paid whatever wage and being reimbursed for mileage, wouldn't that possibly go away.

If/when the CA bill passes, are they going to need to rewrite the mileage reimbursement tax laws with a special gig app section?

From what I've read, depending on how an employer reimburses you for mileage, you may or may not be able to deduct mileage on your taxes.


Just curious as to how people believe this would work.

I'm not personally familiar with any jobs where your personal vehicle is used as much as it is in this gig.
The TCJA eliminated this EMPLOYEE deduction entirely starting in 2018 and continuing through 2025 for federal returns. This means that if you’re an employee who drives for work you may not deduct any of your car expenses on your personal federal tax return. Employers can reimburse you up to 58 cents per mile for 2019.
 

WAHN

Well-Known Member
  • Thread Starter Thread Starter
  • #12
The TCJA eliminated this EMPLOYEE deduction entirely starting in 2018 and continuing through 2025 for federal returns. This means that if you’re an employee who drives for work you may not deduct any of your car expenses on your personal federal tax return. Employers can reimburse you up to 58 cents per mile for 2019.
As a tax guy, what's you're opinion on how this would affect drivers if/when they become employees.

Maybe some hypotheticals with past client data?

Most jobs don't require such extensive use of a personal vehicle, so do you think some changes to the tax code could evolve from this?
 

UberTaxPro

Well-Known Member
Past Sponsor
As a tax guy, what's you're opinion on how this would affect drivers if/when they become employees.

Maybe some hypotheticals with past client data?

Most jobs don't require such extensive use of a personal vehicle, so do you think some changes to the tax code could evolve from this?
IMO ride-share drivers are better off being IC's. It wouldn't surprise me at all if Uber decides not to operate in a state requiring drivers to be employees. If it happens and Uber stays, they'll probably reimburse employee drivers for "on trip" miles. If they were to reimburse for "online miles" they would go broke! With all the additional payroll costs etc. I would expect the riders fare to increase substantially. I don't see the tax code being changed to accommodate the ride-share industry or any particular state.
I haven't seen any of this proposed CA legislation, does anyone know if it includes taxi companies also?
 

observer

Well-Known Member
Moderator
Even though you cannot deduct the mileage on your taxes as an employee, Uber is still required by California state law to reimburse employees for all expenses free and clear of your hourly pay.

This includes vehicle costs, part of your phone bill and any other business related expenses.

Vehicle costs can be reimbursed by either using actual costs or the federal mileage rate.
Post automatically merged:

Uber will also have to pay all mileage/vehicle expenses including dead miles.
Post automatically merged:

Since the whole CA bill has people dreaming of earning a livable wage by being deemed an employee, I'm just curious about the tax implications of such a declaration.

As it stands now, we can write off standard mileage or claim actual vehicle expenses from our IC earnings.

As an employee being paid whatever wage and being reimbursed for mileage, wouldn't that possibly go away.

If/when the CA bill passes, are they going to need to rewrite the mileage reimbursement tax laws with a special gig app section?

From what I've read, depending on how an employer reimburses you for mileage, you may or may not be able to deduct mileage on your taxes.


Just curious as to how people believe this would work.

I'm not personally familiar with any jobs where your personal vehicle is used as much as it is in this gig.
I worked at a company in California a few years back where I used my personal vehicle full time.

I got a payroll check with taxes deducted and I got a separate check for mileage reimbursement.
Post automatically merged:

IMO ride-share drivers are better off being IC's. It wouldn't surprise me at all if Uber decides not to operate in a state requiring drivers to be employees. If it happens and Uber stays, they'll probably reimburse employee drivers for "on trip" miles. If they were to reimburse for "online miles" they would go broke! With all the additional payroll costs etc. I would expect the riders fare to increase substantially. I don't see the tax code being changed to accommodate the ride-share industry or any particular state.
I haven't seen any of this proposed CA legislation, does anyone know if it includes taxi companies also?
I haven't seen anything about taxi drivers specifically but Dynamex should also cover taxi drivers.
 
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Stevie The magic Unicorn

Well-Known Member
The TCJA eliminated this EMPLOYEE deduction entirely starting in 2018 and continuing through 2025 for federal returns. This means that if you’re an employee who drives for work you may not deduct any of your car expenses on your personal federal tax return. Employers can reimburse you up to 58 cents per mile for 2019.
If they are paying by the mile isn't that a reimbursement?

Anything beyond 58c would be taxable..
 

UberTaxPro

Well-Known Member
Past Sponsor
If they are paying by the mile isn't that a reimbursement?

Anything beyond 58c would be taxable..
And anything less than 58c is not deductible with the TCJA. Many companies that reimburse employees for their mileage do so below the SMR. In 2017 you could deduct the difference, not anymore.
 

observer

Well-Known Member
Moderator
IMO ride-share drivers are better off being IC's. It wouldn't surprise me at all if Uber decides not to operate in a state requiring drivers to be employees. If it happens and Uber stays, they'll probably reimburse employee drivers for "on trip" miles. If they were to reimburse for "online miles" they would go broke! With all the additional payroll costs etc. I would expect the riders fare to increase substantially. I don't see the tax code being changed to accommodate the ride-share industry or any particular state.
I haven't seen any of this proposed CA legislation, does anyone know if it includes taxi companies also?
 

njn

Well-Known Member
Dymamex pay and benefits are retroactive after the reclassification. Does every 'employee' now have to amend their taxes?
 

FLKeys

Well-Known Member
Dymamex pay and benefits are retroactive after the reclassification. Does every 'employee' now have to amend their taxes?
I would think not. The money may be based on the past however it is taxed in the year you received it so I don't see why anyone would need to amend their past taxes.
 

EngineerAtHeart

Well-Known Member
Couple of predictions:

1. The $.58 cents will be reimbursed to us s required. They will probably pay us for all mileage in rides and between rides. Not for starting or ends our days (if we live far away from city centers like I do while offline).

2. They will probably eliminate the mileage portion of our fares and increase the per-minute. If your fares per-minute rate doesn't reach the minimum wage set.You will get the difference.

3. Like New York, you will probably not be allowed to go online any time you want. And will enter a queue to go online, with priority going to better drivers. This will be bad for far suburban drivers where ridership is much lower.
 
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