Uber, Lyft, DoorDash, Instacart, Upwork. Gig workers are 1099 contractors. The platform pays you gross, you handle every tax dollar yourself. Here is the structure.
PayslipIQ provides educational information and estimated calculations only. It does not provide tax, legal, financial, accounting, employment, benefits, or payroll advice. PayslipIQ is not a CPA firm, law firm, financial advisor, payroll provider, or tax authority. Always verify your paycheck, deductions, withholdings, and tax position with your employer's payroll department, a qualified CPA, the IRS, your state tax authority, or another appropriately qualified professional. Calculations are estimates; your actual paycheck may differ based on factors specific to your employer, location, benefits elections, and personal tax situation.
How platforms report you
Most gig platforms issue Form 1099-K (payment-app payouts) or Form 1099-NEC (non-employee compensation). The IRS lowered the 1099-K threshold in recent years. Verify the current threshold for the tax year you are filing.
What you owe
- Federal income tax on net earnings (gross minus business expenses) at your bracket.
- Self-employment tax: 15.3 percent on net up to the Social Security wage base, then 2.9 percent (plus 0.9 above $200k single) on the rest.
- State income tax where applicable.
- Estimated quarterly taxes via Form 1040-ES if you expect to owe $1,000 or more at year-end.
Deductible business expenses
Schedule C is your friend. Mileage (standard or actual), portion of phone and data, supplies, parking, tolls, platform commissions. Keep records. The IRS standard mileage rate is published annually.
Health insurance and retirement
Self-employed health insurance premiums are deductible above the line. SEP-IRA, Solo 401(k) and SIMPLE IRA all have far higher limits than employee 401(k). Talk to a CPA before opening one.
Frequently asked questions
- Do I owe tax on every dollar from gig work?
- On net earnings (gross minus deductible business expenses). Mileage, phone portion, supplies, platform fees are common deductions. Keep records.
- Should I form an LLC?
- An LLC alone does not change federal tax. A single-member LLC is taxed as a sole proprietor by default. An S-Corp election can reduce SE tax in some cases. Talk to a CPA.
- What is the standard mileage rate?
- The IRS publishes it annually. Multiply business miles times the rate, or alternatively track actual vehicle expenses. Verify the current rate at irs.gov.
- Do I file taxes quarterly?
- If you expect to owe $1,000 or more at year-end, yes. Form 1040-ES. Failure to pay can trigger underpayment penalties.