Do Uber Drivers need to pay taxes if they make less than $600?

Ridesharing is great, no way about getting around it. It provides flexible work opportunities, allowing people to earn income on their own schedule. However, like any job, you are required to pay taxes on the money you earn as a rideshare driver. This leads many new drivers to ask - do you need to pay taxes if you only make less than $600 working for Uber?

Despite some healthy debates and misconceptions throughout, the answer is yes. You are still required to pay taxes on rideshare earnings, even if it's less than $600 for the year. Here are some key reasons why:

What the $600 1099-MISC Threshold Means

The $600 figure refers specifically to the threshold for 1099-MISC tax forms. Companies are only required to issue a 1099-MISC documenting non-employee compensation if they paid an individual over $600 for the year.

However, this does not apply to to Uber. Uber will provide a 1099-K form detailing your full yearly earnings, regardless of the amount. So don't assume that just because you made under $600 with Uber that you won't receive tax documentation.

Self-Employment Taxes Apply to All Net Earnings

As a rideshare driver, you are considered self-employed. This means you have to pay self-employment taxes on all your net earnings - income after deducting eligible business expenses. Self-employment tax is 15.3%, divided between Social Security and Medicare taxes. This is required no matter how much you make, even if it's less than $600. The only exception is if rideshare driving is a hobby instead of a business for you.

You Owe Income Taxes on Net Profits

In addition to self-employment tax, you also have to pay federal and possibly state income taxes on your net profits from rideshare driving. Net profit is your income minus allowable tax deductions like mileage. So even if your net profit is small after deductions, you still have to report it and pay any owed income taxes. You only avoid income taxes if you have a net loss for the year.

Quarterly Estimated Payments Required if Owing $1,000+

To avoid underpayment penalties, the IRS requires you to pay estimated taxes quarterly if you expect to owe at least $1,000 when you file your tax return. Since rideshare drivers are self-employed, most will need to make quarterly estimated payments to stay compliant. You may owe over $1,000 in taxes even if you earn less than $600 from Uber after accounting for self-employment taxes and income taxes.

You Must Report All Income, Even Under $600

The federal filing requirement for self-employed individuals is to file a tax return if your net earnings are $400 or more. But even if your profit is under $400, you still have to report that income and pay self-employment tax. The $400 threshold is for total income from all sources, not just rideshare earnings.

So remember:

$600 threshold for 1099-MISC forms

$400 threshold for filing a tax return

Anything above $0 for reporting income.

Be sure to track expenses, report all income, make estimated tax payments, and stay compliant with IRS requirements. Don't avoid paying taxes just because you didn't earn much with Uber. Paying taxes comes with the territory of being a rideshare driver.

Easily Tracking Your Income(and expenses)

Okay so you have to pay the taxes on it. How do you keep track of what you made, what you spent, and what your end of year profit is?  This is where the Everlance app comes in handy! By simply linking your account, Everlance can calculate and classify your earnings right from your phone.

Everlance car mileage tracker also allows you to automatically track your trips and classify with an easy swipe. Drivers are entitled to 65.5 cents per business mile in tax deductions, which adds up quickly. In addition, by linking your account, you can track business expenses like car washes, phone chargers, and mints for the riders. Simply swipe to classify for business and you're done. When it's time to file, Everlance makes it simple to export your income and deductions with IRS-compliant reporting.

Having an accurate mileage and earnings log from Everlance makes tax time much smoother. You can confidently report your rideshare income, mileage deductions, and other expenses knowing that Everlance provides auditable documentation. This helps maximize your deductions and ensure you don’t overpay on taxes.

The peace of mind of having your rideshare finances organized is well worth it. Sign up for Everlance so you have one less thing to worry about as a rideshare driver! The app is free to use, so give it a try and see how much it simplifies your taxes.

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As always, for specific tax related questions, please refer to an accountant or tax pro who can help with your individual situation.