Now that the new tax season has started with the beginning of the tax year, you may wonder how much you will have to pay as a Grubhub driver because you can’t avoid taxes even though it is self-employment.
To know how much you should pay as a driver all depends on the earnings from the job. Only those earning less than $400 are exempt from income tax, but you still have to pay tax.
Taxes payable as a Grubhub driver
Grubhub’s drivers are in a range of workers that differentiates them from the other groups, considered by the government as owners of their own business due to the company’s policies.
Therefore, they need to pay the taxes belonging to the owners of their businesses, such as the social security tax, which is 12.4%, and the medicare tax, which is 2.9%.
Likewise, where you live, your marital status, and your tax bracket will influence your taxes. Making you pay different tax brackets than others.
How do I know when to pay?
The IRS sends out a form called a 1099-NEC on January 31 of each year, on which you will report all of your compensation income as unemployed. Previously, the 1099-MISC was used for a while; in 2020, the 1099-NEC was reintroduced.
But it will only be received by Grubhub drivers with earnings over $600, according to the regulations explained by Treasury in 2020 when it reimplemented 1099-NEC.
Now, when you earn more than $20,000 with 200 transactions, instead of receiving the 1099-NEC, you will receive the 1099-K.
In contrast, in the states of Massachusetts and Vermont, you will always receive a 1099-K form. However, only in those states due to their internal policies.
What are 1099-K forms?
It is a variant of the 1099 forms used to report transactions with third-party payment cards or networks. It reports all types of reportable payment card transactions or third-party network business settlements.
How can I reduce my taxes as a Grubhub driver?
Of the best ways to avoid the stress caused by all the taxes and fiscal obligations, it is always good to know how the government works to get the most out of it.
In the case of the United States, it does not force you to pay your taxes in a single annual transaction, making it a heavier expense in your pocket. Instead, it divides the payments into four quarterly dates to reduce the stress of the payments.
But this doesn’t mean that there is more time to pay; if you don’t report your income and pay your taxes on time, the IRS can easily find you. So it would be convenient to keep the four payments on time during the tax year.
Each quarterly payment due date starts on April 15, then June 15, September 15, and ends the tax year on January 15 of the following year. For this reason, it is easier to deduct your taxes.
You need to keep track of everything you pay annually and divide it by 4 to calculate how much the quarterly expense will be to avoid missing cancellation dates or not having enough money when the date arrives.
At the same time, if it is your first time working with Grubhub as a driver, the best thing to do is to estimate how much money you plan to produce per year and run it through the formula explained above.