Are Uber drivers employees or independent contractors? This question is being debated lately in a number of court cases throughout the country. According to Uber, their drivers are independent contractors.

So, Uber drivers, what does this mean for you?

Unlike full-time employees whose employers withhold income taxes from paychecks, independent contractors are responsible for their own taxes. And since you don’t get reimbursed for business expenses like an employee would, it’s important to know how to claim them on your taxes.

The money you make as an Uber driver is subject to self-employment taxes. In January, you should receive a 1099-K and 1099-MISC form showing the total amount collected for your rides. Keep in mind that these tax forms will not include Uber’s fees or your out-of-pocket expenses.   

What are your filing options?  

  • The standard mileage deduction of 57.5 cents per mile for 2015. Keep a log or journal of all mileage driven. (If you choose this route, you cannot deduct actual expenses.) 
  • Actual expenses include vehicle lease payments (depreciation if you own the vehicle), maintenance expenses, gas, oil, insurance or registration. Track your spending and keeping receipts from every oil change, gas fill-up and repair.     

In addition to mileage and maintenance, you can also deduct other expenses like your mobile phone bill and passenger supplies, like mints and water. Additional business expense may be deductible such as fees to Uber and city and state business licenses.  

What can you do now to prepare for tax time?   

  • Review the tax information section in your driver account to see your year-to-date mileage and fees. 
  • Consider accounting for the self-employment tax ahead of time by making estimated tax payments or adjusting your withholdings with your main employer, if you have one.  
  • Hold on to your receipts and keep an accurate record of your mileage, using a mileage log, and business expenses.  

Find out all you need to know about the digital economy and your taxes. Stay tuned for next week's topic: Airbnb income.

Disclaimer: Tax Lounge is an informational source for industry news and related topics. We take every effort to provide honest and accurate tax information, but this information should not be a substitute for professional tax advice. Use our office locator to find your local tax office or subscribe to our free newsletter.