Understanding Your Tax Obligations as a DoorDash Driver

As independent contractors, DoorDash drivers are typically responsible for several types of taxes: federal income tax, self-employment tax, and potentially state and local income taxes . 

Federal Income Tax: This is a tax on the driver's taxable income, which is their total earnings from DoorDash and other sources, minus any allowable deductions . The amount of federal income tax owed depends on the individual's total taxable income and their chosen filing status. The federal income tax system utilizes a progressive tax bracket system, where different income levels are taxed at different rates . For example, in 2024, for single filers, the tax rates range from 10% for income up to $11,600 to 37% for income exceeding $609,351 . Understanding these brackets helps drivers anticipate their potential federal income tax liability. 

Self-Employment Tax: This tax is unique to self-employed individuals and covers their Social Security and Medicare tax obligations . In a traditional employment setting, these taxes are split between the employer and the employee. However, as independent contractors, DoorDash drivers are responsible for the entire 15.3% self-employment tax, which is comprised of 12.4% for Social Security and 2.9% for Medicare . It's important to note that the Social Security portion of this tax has an income limit, which for 2024 applies to the first $168,600 of earnings . This tax is in addition to federal income tax and represents a significant portion of the tax burden for DoorDash drivers. 

State Income Tax: Many states also impose an income tax on their residents' earnings . The rates and brackets for state income tax vary significantly depending on the state. Some states have a flat income tax rate, while others have progressive systems similar to the federal government. It is crucial for DoorDash drivers to research the specific income tax regulations of their state to ensure compliance . 

Potential Local/City Taxes: In addition to federal and state taxes, some localities may also impose income taxes or require business licenses and associated fees for individuals operating within their jurisdiction . Drivers should investigate whether their city or county has any such requirements that apply to independent contractors like themselves

To navigate their tax responsibilities, DoorDash drivers need to be familiar with several key tax forms provided by the Internal Revenue Service (IRS) . 

Form 1099-NEC (Nonemployee Compensation): This form is provided by DoorDash to drivers who have earned $600 or more during the tax year . It reports the total amount of nonemployee compensation paid to the driver and is crucial for accurately reporting income on their tax return . 

Form 1040 (U.S. Individual Income Tax Return): This is the primary form used by individuals to file their federal income tax return . DoorDash drivers will use this form to report their total income, including earnings from DoorDash, and to calculate their overall tax liability . 

Schedule C (Form 1040): Profit or Loss from Business (Sole Proprietorship): This form is used by self-employed individuals, including DoorDash drivers, to report their business income and expenses . By detailing their earnings and deducting eligible business expenses, drivers can calculate their net profit or loss from their DoorDash activities, which is then transferred to Form 1040 . 

Schedule SE (Form 1040): Self-Employment Tax: This form is used to calculate the amount of self-employment tax owed by the driver . The calculation is based on the net profit reported on Schedule C. Schedule SE determines the total Social Security and Medicare taxes the driver is responsible for . 

Form 1040-ES (Estimated Tax for Individuals): This form is used to estimate the amount of tax an individual expects to owe for the year, including both income tax and self-employment tax . It also includes instructions for making quarterly estimated tax payments, which may be required for DoorDash drivers who anticipate owing $1,000 or more in taxes . 

While Form 1099-NEC is the most common form received from DoorDash, some drivers might also receive Form 1099-K (Payment Card and Third Party Network Transactions) if they meet certain thresholds related to the volume and amount of payments processed through third-party networks like Stripe . Both forms provide information about the driver's earnings and should be used when preparing their tax return

DoorDash partners with a third-party payment processor, Stripe, to distribute the Form 1099-NEC to its eligible drivers . Drivers who have earned $600 or more during the calendar year on the DoorDash platform will receive this form . 

Typically, in early January, Dashers can expect to receive an email from Stripe with instructions on how to access their 1099-NEC form through a platform called Stripe Express . This email will guide drivers through the process of creating an account or logging in if they already have one . Once logged in, drivers will usually have the option to consent to electronic delivery of their tax form, allowing them to view, save, export, or print their 1099-NEC as a PDF . This electronic copy is typically available by January 31st . 

For drivers who do not opt for electronic delivery or do not receive an email from Stripe, a paper copy of the 1099-NEC form will be mailed to the address on file, typically by the end of January . It's important to ensure that the address information in the Dasher app is accurate to avoid any delays in receiving the form . 

Upon receiving the 1099-NEC, drivers should carefully review all the information, including their name, address, and taxpayer identification number (Social Security number or Employer Identification Number), to ensure its accuracy . If any information is incorrect, it's usually possible to make changes directly through the Stripe Express platform, especially before a certain deadline . After this deadline, drivers may need to contact DoorDash support to request updates . Correcting any errors promptly is crucial to avoid delays in tax filing and potential issues with the IRS

Given that DoorDash does not withhold taxes, many drivers may be required to make estimated tax payments on a quarterly basis to the IRS . This "pay-as-you-go" system ensures that individuals are paying their tax liability throughout the year, rather than facing a large tax bill at the time of filing . 

Generally, DoorDash drivers are required to pay estimated taxes if they expect to owe $1,000 or more in federal taxes for the year, including both income tax and self-employment tax . To determine if they meet this threshold, drivers need to estimate their total income for the year and their expected deductions . 

The IRS has established specific deadlines for making these quarterly payments : 

• Quarter 1: January 1 to March 31 - Due April 15
• Quarter 2: April 1 to May 31 - Due June 15
• Quarter 3: June 1 to August 31 - Due September 15
• Quarter 4: September 1 to December 31 - Due January 15 of the following year

It's important to note that if any of these deadlines fall on a weekend or holiday, the due date is typically shifted to the next business day . 

Failure to pay estimated taxes on time or underpaying the estimated amount can result in penalties from the IRS . To avoid these penalties, drivers should carefully estimate their tax liability and make timely payments . Several methods can be used for estimation, including using IRS Form 1040-ES, which includes worksheets to help calculate the estimated tax . Another common approach is to set aside a certain percentage of each payment received from DoorDash to cover estimated taxes; some experts recommend setting aside around 25% to 30% . The IRS also offers a Tax Withholding Estimator tool on its website, which can help individuals, including self-employed workers, estimate their tax liability 

One of the significant benefits for independent contractors like DoorDash drivers is the ability to deduct certain business-related expenses from their gross income . These deductions reduce their taxable income, which in turn lowers their overall tax liability . It's crucial for drivers to understand which expenses qualify as deductible and to keep accurate records to support their claims . Common categories of deductible expenses for DoorDash drivers include: 

• Vehicle Expenses: This is often the most substantial deduction for delivery drivers and can be calculated using either the standard mileage rate or the actual expense method . 
• Cell Phone and Data Expenses: The portion of the driver's cell phone and data plan that is used for business purposes is deductible . 
• Delivery Equipment and Supplies: Costs for items like hot bags, insulated containers, courier backpacks, phone mounts, and chargers that are necessary for performing deliveries are deductible . 
• Parking Fees and Tolls: Any parking fees or tolls incurred while on delivery trips are deductible business expenses . 
• Home Office Deduction: If a driver uses a specific area of their home exclusively and regularly for business activities related to DoorDash, they may be eligible for the home office deduction . However, eligibility for delivery drivers can be complex as their primary place of business is often considered to be their vehicle and the locations where they pick up and deliver . 
• Other Potential Deductions: This can include expenses like business licenses (if required), professional services such as mileage tracking software or accounting software, and potentially health insurance premiums if the driver is self-employed and meets certain criteria 

As mentioned, vehicle expenses are a major consideration for DoorDash drivers, and there are two primary methods for deducting these costs . 

Standard Mileage Rate: This method allows drivers to deduct a fixed amount for every business mile driven . For the 2024 tax year, the standard mileage rate for business use is 67 cents per mile . This rate is intended to cover the average costs of operating a vehicle, including gas, maintenance, repairs, insurance, and depreciation . To use this method, drivers must keep a detailed log of all their business miles, including the date, purpose, and number of miles driven for each trip . Commuting miles (driving from home to the first pickup and from the last drop-off back home) are generally not deductible . Even when using the standard mileage rate, drivers can typically still deduct parking fees and tolls incurred during business use separately

Actual Expense Method: Alternatively, drivers can choose to deduct the actual expenses they incur for operating their vehicle for business purposes . This includes costs such as gasoline, oil changes, repairs, maintenance, insurance, vehicle registration fees, licenses, and depreciation (if the vehicle is owned) or lease payments (if the vehicle is leased) . If the vehicle is used for both business and personal purposes, drivers can only deduct the portion of these expenses that is attributable to business use . This requires careful tracking of all vehicle-related expenses and the percentage of time or mileage the vehicle is used for business . The actual expense method may be more beneficial for drivers whose actual operating costs exceed the deduction they would receive using the standard mileage rate . 

The choice between these two methods depends on individual circumstances. The standard mileage rate is simpler for record-keeping, while the actual expense method may result in a larger deduction for some drivers, especially those with high vehicle operating costs or who drive a lower number of business miles . It's important to note that if the standard mileage rate is chosen in the first year a vehicle is used for business, it must generally be used for all subsequent years the same vehicle is used for business

Beyond vehicle expenses, DoorDash drivers can often deduct a range of other business-related costs . 

Cell Phone and Data Expenses: Since a smartphone is essential for using the DoorDash app and navigating deliveries, a portion of the monthly cell phone bill and data plan can be deducted as a business expense . If the phone is used for both personal and business purposes, only the percentage related to business use can be deducted . Maintaining records of work-related usage can help determine the deductible amount . 

Delivery Equipment and Supplies: Items purchased specifically for delivery work, such as insulated hot bags and cold bags, courier backpacks, phone mounts, and car chargers, are typically deductible . Keeping receipts for these purchases is important . 

Parking Fees and Tolls: Any parking fees paid when picking up or delivering orders, as well as tolls incurred during delivery routes, are deductible expenses . It's advisable to keep records of these expenses, such as receipts for parking garages and toll transponder statements . 

Home Office Deduction: If a driver uses a dedicated space in their home exclusively and regularly for administrative tasks related to their DoorDash business, such as managing earnings, tracking expenses, or communicating with DoorDash, they may qualify for the home office deduction . This deduction allows drivers to write off a portion of their home-related expenses, such as rent or mortgage interest, utilities, and insurance, based on the percentage of their home used for business . However, for delivery drivers whose primary work occurs outside the home, meeting the strict IRS requirements for this deduction can be challenging . 

Other Potential Deductions: Depending on their specific circumstances, DoorDash drivers may also be able to deduct other business-related expenses, such as fees for business licenses or permits required for their delivery activities . The cost of professional services, such as fees paid for mileage tracking apps, navigation apps (if a premium subscription is necessary for work), or tax preparation software or services, may also be deductible . Self-employed individuals, including DoorDash drivers, may also be eligible to deduct the premiums they pay for health insurance for themselves, their spouse, and their dependents, as long as they are not eligible to participate in an employer-sponsored health plan . Additionally, contributions made to certain self-funded retirement plans, such as a SEP IRA or SIMPLE IRA, may be deductible . Finally, self-employed individuals can deduct one-half of their self-employment tax liability 

Maintaining accurate and detailed records of all income and expenses is paramount for DoorDash drivers when it comes to tax time . Proper record-keeping not only ensures that drivers can accurately report their earnings and claim all eligible deductions but also provides crucial documentation in the event of an IRS audit . 

For income tracking, drivers should keep records of all payments received from DoorDash, including base pay, tips, bonuses, and incentives . While DoorDash provides earnings summaries and the Form 1099-NEC, it's wise to maintain a personal log or utilize a financial tracking app to record income on a regular basis, especially for cash tips which may not be reflected in the official forms . 

For expense tracking, drivers should save all receipts for business-related purchases, such as gas, vehicle maintenance and repairs, phone accessories, delivery equipment, and any other deductible expenses . For vehicle expenses, especially if using the actual expense method, detailed records of every expenditure are essential . If using the standard mileage rate, a meticulous mileage log is required, documenting the date, purpose, and miles driven for each business trip . Several methods can be used for record-keeping, including traditional paper logs and receipts, spreadsheets, or dedicated mileage and expense tracking apps available for smartphones . Utilizing these tools can help drivers stay organized and ensure they don't miss any potential deductions

Does DoorDash withhold taxes? No, DoorDash does not withhold federal or state income taxes, Social Security, or Medicare taxes from its drivers' earnings as they are classified as independent contractors . 

How do I get my 1099 from DoorDash? DoorDash sends the Form 1099-NEC to eligible drivers (those who earned $600 or more) via their partner, Stripe. Drivers will typically receive an email from Stripe in early January with instructions on how to access their 1099-NEC through the Stripe Express platform, where they can opt for electronic delivery or receive a paper copy by mail . 

How much should I set aside for DoorDash taxes? It is recommended that DoorDash drivers set aside a portion of each payment to cover their tax obligations. A general guideline is to save between 25% to 30% of their net earnings to account for federal income tax, self-employment tax, and potentially state and local taxes . Using the IRS Tax Withholding Estimator can also help in determining the appropriate amount to set aside . 

What tax forms do DoorDash drivers need? The primary tax forms DoorDash drivers will likely need are Form 1099-NEC, Form 1040, Schedule C (Form 1040), Schedule SE (Form 1040), and potentially Form 1040-ES for estimated taxes . 

Are tips taxable? Yes, all income earned as a DoorDash driver, including tips received through the app or in cash, is considered taxable income and must be reported on the tax return . 

Do I need to file taxes even if I earn less than $600? Generally, if a self-employed individual earns net earnings of $400 or more, they are required to file a tax return . Even if earnings are below this threshold, filing may be necessary in certain situations, such as to claim refundable tax credits

For further information and guidance on DoorDash driver taxes, several helpful resources are available:

• IRS Gig Economy Tax Center: The IRS provides a dedicated section on its website for gig economy workers, offering information on tax obligations, deductions, and filing requirements . 

• IRS Publications: Several IRS publications offer detailed information relevant to self-employed individuals, including Publication 334, Tax Guide for Small Business , Publication 463, Travel, Gift, and Car Expenses , Publication 535, Business Expenses , and Publication 587, Business Use of Your Home . Information about self-employment tax can be found in the instructions for Schedule SE (Form 1040) . 

• Reputable Financial Websites and Tax Software: Websites like TurboTax , H&R Block , and FlyFin offer resources and tax preparation services specifically for self-employed individuals and gig workers. 

• Tax Professionals: Consulting with a qualified tax professional, such as a Certified Public Accountant (CPA) or an Enrolled Agent (EA), can provide personalized advice based on an individual's specific financial situation and help ensure accurate tax filing 

DoorDash does not withhold taxes from its drivers' earnings. As independent contractors, DoorDash drivers are responsible for understanding and meeting their own tax obligations, which include federal income tax, self-employment tax, and potentially state and local taxes. Familiarity with key tax forms like the 1099-NEC, 1040, Schedule C, and Schedule SE is essential, as is the understanding of the potential need to make estimated quarterly tax payments. By diligently tracking their income and expenses, and by taking advantage of all eligible deductions, DoorDash drivers can manage their tax responsibilities effectively and minimize their tax liability. Utilizing the resources provided by the IRS and considering professional tax advice can further empower drivers to navigate the complexities of self-employment taxes with confidence.