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As a shopper or driver, you have the freedom to work when you want and where you want, all while helping people get the groceries and household items they need. That's exciting! What creates this freedom is you're an independent contractor. What does that mean? If you're not familiar, means you're self-employed, running the business of YOU. This comes with some additional benefits and some additional obligations.
While there are many different things to consider, we're going to focus on the tax side of the house and how to best prepare for IRS compliance as a Shipt Shopper. We'll go over income, expenses, deductions, filing, and how to best prepare. At the end of this article, you'll find a discount for Shipt Shoppers on Everlance Premium, to help keep everything organized and automated, or..."in cruise control" as we like to say (I know, I know..dad joke)
Being an independent contractor means that you are responsible for reporting your income and expenses and paying taxes on your earnings. To help you set up for success on next year's taxes, here are some tips to keep in mind:
Shipt has some great FAQs to help with any questions you may have. You can find those here Shipt Shopper FAQ | Is Shopping with Shipt Worth It?. Shoppers are paid per order and also have the opportunity to earn tips and bonuses as applicable. Pay comes each Friday through direct deposit.
Pretty good gig right? One thing to keep in mind here, since you’re an independent contractor you aren’t having taxes taken out of your check, like working a W2 might lead to. So if you make $100 on the Shipt platform, after any applicable fees, your deposit will be $100 and you are responsible for taxes required by the IRS. (We’ve got you covered here: The Ultimate Guide to Self-Employed Taxes | Everlance)
Being a Shipt shopper comes with some great Shopper Perks! As you set yourself up for success, don’t leave money on the table by not leveraging discounts that may be available to you.
As a Shipt Shopper, you will need to report all of your income on your tax return. Make sure to keep track of all the money you earn from Shipt, including tips and bonuses. Within your Shopper app, you’ll have access to all of your earnings. Shipt will also provide a 1099 form reporting your income at the end of the year, if you meet a certain threshold.
If Shipt is your only source of income, this should be plenty, though it never hurts to track on your own). If you have multiple sources of income, whether it be additional apps, a night job, a day job, a day and night job, whatever the situation may be, it’s essential to keep this tracked on your own so you can report at the end of the year. This can be a simple spreadsheet or an app that does it all for you(*cough* *cough* we know one Everlance for Shipt Shoppers
It’s critical that you keep a record of all your expenses related to your work as a Shipt Shopper. This includes things like supplies, equipment(such as your phone), bills, software costs, commission fees, anything that you are paying for to help run your business. You can find some more examples here: 9 Best Tax Deductions for Shipt Drivers| Everlance
Why is this critical? The IRS understands it costs money to run a business, so they don’t tax just your revenue, they tax your profit. In arguably way way too simple terms: If you have $1000 in income, $0 in expenses…your profits are $1000, and that’s what you’re paying taxes on. If you have $1000 in income, $500 in expenses, your profits are $500, and you’re paying taxes on that.
Now, the old way of doing this used to be keeping a shoebox of receipts and adding them all up at the end of the year. Thankfully, with tools like Everlance, we’ve moved beyond that. All you have to do is link a bank account or credit card, swipe the expense for work or personal, and go about your way.
Technically, yes, mileage is an expense for independent contractors..so some might argue is falls into the category above. Sure, but being the most missed tax deduction among self-employed individuals, and for many, the most valuable (Every mile you drive for work is worth 65.5 cents in deductions. So, drive 1000 miles, write off $655).
The IRS has very specific requirements to log your work trips, so it’s important to log them correctly. They need date, destination, purpose, start, stop, and total mileage. For one-off trips? Sure, not bad..but if you’re doing multiple trips a day, this becomes cumbersome. Thankfully there are many GPS-based mileage trackers that will help you out with this, including Everlance. Everlance runs in the background and allows you to track each trip individually, and simply swipe for work or personal, or set up a work session to record all trips during certain hours for work purposes.
One of the main decisions that Shipt shoppers must make is whether to use the standard mileage rate or to itemize their expenses. The standard mileage rate is a set rate for each mile driven for business purposes(the 65.5 cents above).
In contrast, itemizing expenses involves keeping track of all the expenses related to the business, such as gas, maintenance, and repairs, and deducting them individually. While the majority of workers opt for the standard mileage deduction, the decision to use the standard mileage rate or to itemize expenses depends on a number of factors, including the number of miles driven for business purposes and the total amount of expenses incurred. It's important for Shipt shoppers to consult with a tax professional to determine the best approach for their individual circumstances.
The first tax season for many Shipt Shoppers can be rough. As we covered, taxes aren’t coming out of your paycheck, which means they’re not being paid until it’s time to file. This can come as a shock to many, who have not been setting aside money to prepare. Taxes that may be applicable include federal income tax, self-employment tax, and state and local taxes.
One approach is to estimate the percentage of their earnings that will go towards taxes based on their tax bracket and applicable tax rates and set that amount aside from each payment received. Another option is to use the previous year's tax return as a guide to estimate their tax liability for the current year.
Shipt shoppers can also make estimated tax payments to the IRS throughout the year to further reduce the amount owed at tax time. The IRS requires estimated tax payments if a taxpayer expects to owe more than $1,000 in taxes for the year.
It's important for Shipt shoppers to keep detailed records of their income and expenses to accurately calculate their tax liability and to consult with a tax professional for personalized advice on tax planning and compliance. Stop wondering how to track mileage for taxes, and use an app like Everlance to simplify the process.
There are several options available to you for filing your taxes, including doing it yourself, using tax software, hiring a tax professional, or utilizing a tax preparation service.
If you have a simple tax situation with few deductions and no significant changes to your income, you may be able to file your taxes on your own using tax software or by using the IRS Free File program. This option is generally the most cost-effective, but it may not be the best choice if you are unsure about tax rules and regulations.
Another option is to use tax software such as TurboTax or H&R Block, which guides you through the tax filing process and helps you identify potential deductions and credits. These programs can be a good choice for Shipt shoppers with more complex tax situations or those who want extra support and guidance.
Don’t be surprised by sticker shock! When using a tax software, you’ll mostly likely find that self employed taxes come at a higher cost than what you see in advertisements that are meant for Simple returns (Think a return with only W-2 income, 1 state, standard deduction).
Alternatively, you can hire a tax professional such as a Certified Public Accountant (CPA) or Enrolled Agent (EA) to file your taxes for you. A tax professional can help ensure that you are taking advantage of all the deductions and credits available to you and can answer any questions you have about your tax situation. While this option is more expensive than doing it yourself or using tax software, it can provide added peace of mind and may save you money in the long run.
Finally, tax preparation services such as Jackson Hewitt or H&R Block offer in-person assistance with filing your taxes. These services can be a good choice for Shipt shoppers who prefer face-to-face interaction and may need help with more complex tax situations.
Ultimately, it’s your decision how you best want to proceed, but we recommend at least the first time filing, leveraging a service that has assistance available to you, whether that be live help or hiring a tax professional. This may increase your budget, but worth the peace of mind and quality assurance that it’s done right.
Everlance Premium helps Shipt Shoppers manage and automate their tax tracking in just a few easy steps. The typical premium subscriber keeps 15% more of their income in their pockets by maximizing their deductions, and saves countless hours every year. Track your income, expenses, mileage, and more throughout the year, and generate IRS compliant reporting that can easily be sent to an accountant or uploaded into the tax software of your choice!
Shipt Shoppers get their first three months of Premium for free by following this link: Everlance for Shoppers
By following these tips and taking advantage of the special offer from Everlance, you can set yourself up for success on next year's taxes and ensure that you are fully prepared to meet your tax obligations as a Shipt Shopper. Remember, being proactive with your taxes can save you time, money, and stress in the long run.
Happy Shopping!
Brad Thibeau is the Head of Growth & Partnerships at Everlance. Brad has worked at Everlance since 2021 with a focus on helping self employed people save time and money on their taxes.
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