As an experienced e-commerce expert, I know how important it is for Grubhub drivers to understand the tax implications of their work and find ways to maximize their earnings. After all, taxes can take a significant bite out of your Grubhub income if you‘re not careful.
That‘s why I‘m here to provide you with a comprehensive guide on Grubhub‘s tax practices and the steps you can take to save money as a Grubhub driver. By the end of this article, you‘ll have a clear understanding of how Grubhub handles taxes, what forms you‘ll receive, and the deductions you can claim to reduce your tax burden.
Does Grubhub Take Out Taxes?
The first thing you need to know is that Grubhub does not withhold any taxes from the payments it makes to its drivers. This is because the company classifies its drivers as independent contractors, not employees.
"Grubhub doesn‘t take out taxes because it considers drivers to be independent contractors," explains Marques Thomas, a business and finance expert at QuerySprout. "This means that Grubhub drivers are responsible for paying their own taxes; Grubhub only lets them know how much they were paid."
In other words, Grubhub is not responsible for calculating, withholding, or paying any of the taxes you owe. That‘s all on you, the driver, to handle.
Does Grubhub Give You a W-2?
Since Grubhub drivers are classified as independent contractors, the company does not provide W-2 forms. A W-2 is the tax form that employers use to report an employee‘s annual wages and the amount of taxes withheld from their paychecks.
"Grubhub does not give you a W-2 because it considers drivers to be independent contractors, so this form wouldn‘t fit this working relationship," says Thomas. "A Form W-2 is given by an employer to their employee showing how much they‘ve earned, and how much has been withheld in taxes and other benefits. Grubhub doesn‘t withhold taxes from your income and doesn‘t offer any benefits, so the company doesn‘t issue W-2s."
Instead, Grubhub will provide you with a 1099-NEC (Non-Employee Compensation) form if you earned $600 or more through the platform in a given tax year. This 1099 form outlines your total earnings, which you‘ll then need to report on your annual tax return and calculate the appropriate amount of taxes owed.
Will Grubhub Send Me a 1099 Form?
If you earned $600 or more through Grubhub in a given tax year, the company will send you a 1099-NEC form. This form will detail the total amount of non-employee compensation you received from Grubhub during that period.
"Grubhub will send you a 1099 form that includes how much money you earned from the platform in a calendar year," explains Thomas. "You will only get a 1099 from Grubhub if you earned $600 or more from January 1st to December 31st."
It‘s important to note that the 1099 form is based on when you received payment, not necessarily when you completed the delivery. So, if you accepted an order and delivered it on December 31st, but got paid in January, that payment won‘t be included in the previous year‘s 1099.
According to the IRS, the 1099-NEC form is now the appropriate form for reporting independent contractor earnings, replacing the previous 1099-MISC form. This change was implemented in 2020, and Grubhub has been issuing the 1099-NEC to its drivers since then.
How Is Grubhub Taxed?
Since Grubhub drivers are classified as independent contractors, they are responsible for calculating, reporting, and paying their own taxes. This includes both federal income taxes and self-employment taxes (Social Security and Medicare contributions).
"Grubhub doesn‘t withhold taxes from its drivers," says Thomas. "Instead, the company calculates how much it earned in a calendar year (Jan 1 to Dec 31) and indicates that in a 1099 to the driver. When the driver receives this form, they‘re supposed to do their taxes as usual: calculate how much they owe the IRS for that year, make adjustments for write-offs, then pay that amount."
As an independent contractor, you‘ll need to make estimated quarterly tax payments throughout the year, rather than having taxes withheld from each Grubhub payment. This can take some getting used to, but it also gives you more control over your tax planning.
To give you a better idea of the potential tax implications, let‘s look at some data:
According to a 2021 survey by Stride, the average Grubhub driver earned $17,497 per year. Assuming a 15.3% self-employment tax rate and a 22% federal income tax rate, that would result in an annual tax bill of around $6,524 for the average Grubhub driver.
Of course, your actual tax liability will depend on your individual circumstances, such as your total income, deductions, and filing status. But this should give you a rough idea of the kind of taxes you‘ll need to plan for as a Grubhub driver.
Can Delivery Drivers Write off Gas?
One of the key benefits of being a Grubhub driver is the ability to deduct certain business expenses from your taxable income. Chief among these is the cost of gas used for deliveries.
"Grubhub drivers can write off gas when filing their taxes because it‘s considered a business expense," explains Thomas. "However, you can only write off gas you used when actively working (driving to restaurants, making deliveries, etc.) and that you have receipts for so you can prove the exact amounts you spent."
According to the IRS, the standard mileage rate for business use of a personal vehicle is 58.5 cents per mile in 2022. This means that for every mile you drive for Grubhub deliveries, you can deduct 58.5 cents from your taxable income.
To maximize your gas deduction, be sure to keep detailed mileage logs and receipts for all your Grubhub-related driving. This will make it much easier to calculate your eligible deductions come tax time.
What Else Can I Write off for Grubhub?
Beyond vehicle-related expenses, Grubhub drivers may be able to deduct a variety of other business expenses when filing their taxes. These can include:
- A portion of your cell phone bill, for the time spent communicating with customers
- The cost of any delivery equipment or accessories, such as a thermal bag or insulated box
- If you use a bicycle or scooter for deliveries, the cost of that vehicle
"If you don‘t use a car for Grubhub, you could also write off the following: A portion of your phone bill for what you use to contact customers, your delivery compartment (ex. a cooler if you bought one for the job that year), your delivery vehicle like a bicycle or scooter if you bought it specifically for Grubhub that year," says Thomas.
The key is to keep detailed records of all your Grubhub-related expenses and to consult with a tax professional to ensure you‘re taking advantage of every eligible deduction. This can make a significant difference in your overall tax burden and help you maximize your earnings from Grubhub.
Strategies to Reduce Your Grubhub Tax Burden
As an experienced e-commerce expert, I can share a few additional strategies to help you save money on your Grubhub-related taxes:
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Estimate and Pay Quarterly Taxes: Since Grubhub doesn‘t withhold taxes, you‘ll need to make estimated quarterly tax payments to the IRS. This can help you avoid underpayment penalties and keep your tax bill manageable throughout the year.
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Track Mileage and Expenses Meticulously: Be sure to keep detailed records of all your Grubhub-related mileage and expenses. This will ensure you can claim the maximum allowable deductions when filing your taxes.
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Consult a Tax Professional: While you can certainly handle your Grubhub taxes on your own, it‘s often worth consulting a tax professional, especially if you have a complex financial situation. They can help you identify additional deductions and ensure you‘re in full compliance with all tax laws and regulations.
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Explore Business Entity Options: Depending on your Grubhub earnings and overall financial situation, you may want to consider forming a business entity, such as an LLC or S-Corp. This can provide additional tax advantages and help you save money in the long run.
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Stay Up-to-Date on Tax Laws: Tax laws and regulations can change frequently, so it‘s important to stay informed about any updates that may impact Grubhub drivers. Follow reputable sources and consider joining online communities to stay on top of the latest developments.
Remember, as an independent contractor, managing your taxes can be a bit more complex than for traditional employees. But with the right strategies and guidance, you can ensure you‘re paying the minimum amount required while still staying compliant with all applicable laws and regulations.
Conclusion
As a Grubhub driver, it‘s essential to understand the company‘s tax practices and your responsibilities as an independent contractor. Grubhub does not withhold taxes from your earnings, nor does it provide W-2 forms. Instead, the company will send you a 1099-NEC form if you earned $600 or more through the platform in a given tax year.
From there, you‘ll need to calculate your own tax obligations, including self-employment taxes. However, you can offset some of these costs by deducting eligible business expenses, such as gas, vehicle maintenance, and delivery equipment.
By staying on top of your tax obligations and maximizing your deductions, you can ensure that being a Grubhub driver remains a lucrative and rewarding endeavor. And remember, if you have any questions or concerns, it‘s always best to consult with a qualified tax professional who can provide personalized guidance.
So, what are you waiting for? Start tracking your Grubhub-related expenses and get ready to save some serious money on your taxes. Your future self will thank you!