If you are driving for Instacart (full-time or part-time), you must keep a portion of your income aside for tax. Paying estimated taxes quarterly is the best way to avoid tax penalties and prepare yourself in advance for the tax season. You can also pay annually if you earn a small income from delivery. In this post, we have discussed Instacart and taxes. Read on to learn about your tax obligations from this self-employment income.
Instacart and Taxes: What Taxes Instacart Workers Pay?
Unless you are an in-store shopper, you are considered an independent contractor who’s supposed to file your income tax returns manually. Your income isn’t withheld automatically, leaving you with only one option — paying your taxes annually or quarterly by calculating the dues. Commonly known as FICA taxes, freelancers and business owners have to pay a fixed percentage of Social Security and Medicare taxes yearly, given that their income exceeds the $600 threshold established by the IRS.
This means if you earned more than $600 a year from grocery delivery at Instacart, you are responsible for filling out several 1099 tax forms and clearing your dues by the end of the financial year. The total percentage for self-employed individuals is 15.3% (12.4% for Social Security and 2.9% for Medicare). However, like other self-employed individuals, you can claim many deductions. Your business expenses won’t be counted, and you can cut your taxable income by half.
What Deductions Can You Claim?
You don’t have to pay taxes on all your earnings from driving for Instacart. Your business expenses can be deducted so that you can arrive at the net income for the year. Any business expense related to grocery delivery can be deducted, including parking fees, gas, tolls, registration, car insurance, inspection, repair, maintenance, etc. Keep track of all your business expenses to save more on your tax bill.
How Many Forms do You Need to Fill?
Instacart shoppers are like other self-employed individuals who report income from freelancing, side gigs, and other projects that do not involve a typical employment setting. You need to file form 1040 to show income for the year from all sources. In addition, Instacart shoppers also need to fill out form 1099-NEC and Schedule A or C (depending on the claimed deductions and the income reported for the financial year). You must attach these additional forms to the standard 1040 tax return file. If you have difficulty filing taxes, feel free to seek professional help or turn to tax software.
Another common question is whether you must pay Instacart taxes quarterly or annually. If your income from grocery delivery exceeds $1,000, you will be responsible for filing taxes quarterly. This is done to avoid underpayment penalties. You can calculate your estimated income for the year based on your previous tax bills and pay accordingly. Overpayment is not an issue, as you will get a refund. Underpayment, however, can lead to penalties.
Also Read - WHAT DO ITEMIZING DEDUCTIONS MEAN?