Does DoorDash Take Out Taxes?

This survey note provides a detailed examination of the tax implications for DoorDash drivers, focusing on whether DoorDash withholds taxes and the broader responsibilities for independent contractors. The analysis is based on extensive research and aims to assist drivers in understanding and managing their tax obligations effectively.

Background and Context

DoorDash is a popular food delivery platform where drivers, known as Dashers, deliver orders to customers. The platform classifies its drivers as independent contractors rather than employees, which has significant implications for tax treatment. The question "does doordash take out taxes" typically refers to whether DoorDash deducts taxes from driver earnings, a common concern for gig economy workers.

Research indicates that DoorDash does not withhold taxes from driver earnings, as confirmed by multiple sources such as the Stride Blog (Doordash Is Considered Self-Employment. Here's How to Do Taxes). This classification means drivers are responsible for their own tax payments, a critical distinction from traditional employment where employers withhold taxes.

As independent contractors, DoorDash drivers must report their income on Schedule C, which is part of Form 1040. They are also subject to self-employment tax, covering Social Security and Medicare, as detailed by TurboTax (Filing Taxes for On-Demand Food Delivery Drivers - TurboTax Tax Tips & Videos).

• Specific Responsibilities:Report all DoorDash earnings, including tips, on Schedule C.
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• Pay self-employment tax, which is typically higher than employee payroll taxes due to the lack of employer contribution.
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• Make estimated tax payments quarterly to avoid penalties, as taxes are not withheld.
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• Benefits: Drivers can claim various deductions, reducing taxable income, which is a significant advantage over employees, as noted by Get It Back (How Do Food Delivery Couriers Pay Taxes? - Get It Back).
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Maximizing Tax Deductions

One of the key benefits for DoorDash drivers is the ability to deduct business expenses. The Stride Blog provides a detailed list of deductible expenses, including:

• Mileage: 67 cents per mile in 2024 for business use, but cannot be claimed if gas expenses are deducted instead.
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• Phone and Service: Deductible as a percentage of business use, ensuring personal use is excluded.
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• Supplies: Hot bags, blankets, courier backpacks, and other gear used for deliveries.
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• Other Expenses: Tolls, parking fees, vehicle inspections, and roadside assistance (portion used for work).
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• Important Notes: Traffic violations, speeding tickets, and parking tickets are not deductible, as they are not considered ordinary business expenses. Drivers must maintain accurate records, such as mileage logs and receipts, to substantiate claims.

Filing taxes as a DoorDash driver involves several steps, as outlined by TFX (Doordash Driver Taxes 101: Dashers’ Guide | TFX):

1. Collect Documents: Gather the 1099-NEC form, expense receipts, and mileage logs. DoorDash sends the 1099-NEC to drivers earning $600 or more, typically by January 31, via Stripe Express.
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3. Fill Out Forms: Complete Schedule C to report income and expenses, Schedule SE for self-employment tax, and include these with Form 1040.
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5. File Taxes: Options include using tax software like TurboTax, hiring an accountant, or filing manually. Ensure accuracy to avoid audits.
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• Additional Considerations: Drivers in states with income tax must also file state returns, and local taxes may apply depending on the jurisdiction.
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Best Practices for Managing Taxes

To avoid tax-related stress, drivers should adopt best practices throughout the year, as suggested by Net Pay Advance (DoorDash Taxes: How Does it Work | Net Pay Advance):

• Set Aside Funds: Regularly save a portion of earnings for taxes, aiming for 20-30% to cover federal, state, and self-employment taxes.
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• Keep Records: Use apps like Stride for tracking income, expenses, and mileage, ensuring compliance with IRS requirements.
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• Consult Professionals: For complex situations, consult a tax professional to optimize deductions and ensure compliance.
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• Common Mistakes to Avoid: Failing to make estimated payments can lead to penalties, and not tracking expenses can result in missed deductions, increasing tax liability.
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Conclusion and Recommendations

In conclusion, DoorDash does not take out taxes from driver earnings, placing the onus on drivers to manage their tax responsibilities as independent contractors. This includes reporting income, paying self-employment taxes, and claiming deductions to lower taxable income. By understanding these obligations and following best practices, drivers can avoid penalties and maximize their earnings.

Drivers are encouraged to stay informed about tax laws, use tracking tools, and seek professional advice when needed. For further reading, resources like the Stride Blog and H&R Block provide valuable guidance for gig workers.