How to Avoid Uber-Trouble with the Tax Man
Once, uber was a prefix that meant better, larger or greater than. It prefaced words like cool and rich and expensive. Today, though, we are getting to know Uber as a really cool way to get from one place to another, and as a way for people looking to make some extra money on their own schedule. Uber is a forerunner in what has become known as the “sharing economy.”
If you don’t know what Uber is, you’re certainly not going to run into tax trouble. But, for those who don’t know here’s a brief description I recently read in an online business journal. “Uber is a transportation service that allows passengers to connect with drivers in the area via a smartphone app. Prices get predetermined before the transaction occurs and all fares are paid via the app with a credit card. Generally, no cash is exchanged. Uber is basically a taxi service where the driver uses his or her own automobile.”
As independent contractors Uber drivers are self-employed individual who are responsible for calculating their taxable income. They also must pay federal and state income and self-employment tax on the profits they earn.
According to the same business journal, “Uber drivers earn revenues from the fares they collect from driving passengers. All the fares that a driver receives have to be reported as revenue even if no tax documents (1099-Misc or 1099-K) are received.”
It might be a great way to make some extra cash or to be in business for yourself working on your own schedule, however, many Uber drivers have been running into tax issues with the IRS. That could spell uber-trouble for the not so tax savvy drivers. If you are an Uber driver and find yourself overwhelmed by the tax issues give us a call. The one thing you can be certain of is that every member of the IRSAllstar team is uber-savvy about all tax issues.