If your income from Instacart delivery exceeds $600 in a calendar year, you will be liable to pay self-employment taxes on your own. Since you are an independent contractor, Instacart won’t issue you a W-2 form. You are responsible for doing your taxes. You can either pay estimated quarterly taxes or a lump sum at once (whatever seems suitable).
Just make sure that your tax dues should not exceed $1000, or you will end up facing an underpayment or late payment penalty. It’s best to start tax preparation in advance so you don’t face any stress during tax payments. This post has everything you need to know about Instacart and taxes. Let’s take a look.
Instacart and Taxes: How Deductions Work?
Full-service shoppers and in-store shoppers working at Instacart have to pay an income tax if their income exceeds the minimum threshold set forth by the IRS. Those working full-time at Instacart have nothing to worry about the taxes, as the company will issue a W-2 form and withhold a portion of your income for tax payments. The full-service shoppers, however, work part-time at their flexible times. They need to file their taxes on their own. The good news is that your entire income is not taxable. You only pay taxes on your net income, which is calculated after deducting the business write-offs.
Everything you buy for professional use or a course you take to hone your skills in your line of work is deductible. All you need is a receipt for each transaction or any record showing the expenses. Freelancers or independent contractors tend to forget about these write-offs during the tax season, which leads them to overpay their income tax. It’s important that you keep track of your business expenses so when the tax season arrives, you can subtract them from your gross income and save your hard-earned dollars.
Car Expenses
Since your work involves driving and delivery, vehicle expenses are one of your biggest expenses. You will most likely spend tons of money on fueling and car maintenance. Here’s the list of car expenses you can deduct from your gross income.
- Inspections
- Car maintenance and repairs
- Gas cost
- Parking fees
- Registration
- Tolls
- Car insurance
- Interest on car loans
While car expenses are clearly the biggest expense for an Instacart shopper, there are other deductibles you can claim as long as they are relevant to your line of work. For example, your cell phone bill, a pushcart, bike, and other accessories you bought or used for delivery can be deducted.
You can save a lot by itemizing your deductions if you have kept track of all the expenses that are approved as deductions. However, the problem is keeping a record of each deduction. That’s where the tax software comes into play. You just need to link the tool to your bank accounts. It will automatically detect all purchases and add them to your list of deductions. Before it adds these deductions, the app will ask whether you accept it as a write-off.
The IRS has allowed all Instacart workers and self-employed individuals to deduct 58.5 cents per mile in 2022, up from 56 cents in 2021. This is covered under the standard deduction. There’s one more way to calculate your mileage. It allows you to deduct your business vehicle expenses separately. This method is highly recommended for people who have recently bought a car and are paying auto loans. This will also cover all your mobile expenses, i.e., the phone bills relevant to your work.
Filing Your Instacart Tax
Once you have collected all the necessary forms, filing your Instacart taxes is next. Schedule C, Schedule SE, and form 1040 are a few crucial forms you are supposed to fill out to pay self-employed taxes. Contractors can use Schedule C to determine your net earnings and include your deductions to determine your net income. Note that if you are working multiple jobs, you need to fill out multiple Schedule C (for each source of income).
Schedule SE shows you the total tax amount you owe the IRS. Form 1040 is the standard tax return form that every taxpayer must file at the year’s end. Once you get the net income for the year, you can transfer the amount to the 1040 form. Self-employed individuals have to pay their taxes quarterly in the form of estimated tax payments. But, if you are an in-store shopper, your tax will be automatically deducted through withholding, as mentioned above. The deadlines for estimated tax payments are the 15th of the fourth month, i.e., April, June, September, and January.
If you are still having trouble filing income taxes, feel free to use tax prep software to simplify the job. Or, you can work with an accountant to understand your deductions.
Also Read- What do I Need to File my Taxes