Instacart Taxes: The Complete Guide for Shoppers
Imagine you become an Instacart Shopper, get the hang of things, and start making plenty of money on your own schedule.
But the end of the year rolls around, and you realize you owe thousands of dollars in Instacart taxes.
To avoid a situation like that, start planning for taxes now.
Then, you can make sure you won’t have to pay penalties on your taxes.
Instacart Tax Overview
Instacart taxes can seem overwhelming to new shoppers.
However, like any job, you need to follow all tax laws and pay taxes on your earnings.
Consider some common aspects of paying taxes as an Instacart shopper.
Do You Have to Pay Taxes on Instacart?
As an independent contractor, you have to pay taxes on Instacart earnings.
Now, if you make very little in a year, say if you start in December, you may not need to pay taxes that year.
But if you make a significant amount of money, the IRS will need to collect taxes on your income.
Why Is Filing Instacart Taxes Important?
Filing Instacart taxes is important because it can help you avoid tax penalties.
If you don’t pay your taxes on time, the IRS can charge you extra for the late payment.
Even if Instacart isn’t your primary job, you need to pay to avoid a penalty.
When Should I File My Taxes?
You should file your taxes at the end of the year just like anyone else.
Make sure to file before the tax deadline, which is April 15th.
If that falls on a weekend, the deadline will be the business day following the 15th.
However, you should also pay your taxes quarterly throughout the year.
Then, you won’t have to pay as much at the end of the year, and you can avoid late fees.
Does Instacart Take out Taxes?
Because Instacart shoppers are contractors, the company will not take taxes out of your paycheck.
To make saving for taxes easier, consider saving 25 to 30% of every payment and putting the money in a different account.
What Happens if I Don’t File Instacart Taxes?
You would face the same penalties as any other business that doesn’t file taxes.
The penalty for non-payment is about 10 to 15%, and you’ll have to pay that fee for every month your tax payment is late.
Types of Instacart Taxes
Just like any other employee or business owner, you have to pay a few types of taxes.
That way, you can cover Social Security and Medicare taxes.
Unfortunately, you will be responsible for paying more in taxes than a traditional employee.
Self-employment taxes cover the employee and employer portion, so they can be expensive.
Consider the different types of taxes you will need to pay as a shopper.
Most states (but not all) require residents to pay state income tax.
The tax rates can vary by state and income level.
And if you make money outside of Instacart, your tax bracket will depend on your entire income, not just from shopping for Instacart.
States without income tax include:
- New Hampshire
- South Dakota
Be sure to save for state income taxes all year so that you can pay them when filing at the end of the year.
You also need to pay federal income taxes, whether or not you pay state income taxes.
The tax rate varies from bracket to bracket, so the more you make, the more you’ll owe.
When paying federal taxes, you should consider quarterly taxes and year-end taxes.
You will need to pay your self-employment taxes each quarter if you will make at least $1,000 a year.
Estimated quarterly taxes are due on the 15th of January, April, June, and September.
That can help spread out your tax bill, but you will still need to file your taxes by the following April to make sure you pay what you owe.
Preparing for Instacart Taxes
It can help to know what to expect when paying your Instacart taxes.
Just like other gig economy companies, you’re mostly on your own.
However, Instacart does have to give you some information to help you.
Consider the various tax forms and other documents you’ll need to use to file your tax return.
Necessary Tax Forms for Instacart Shoppers
Instacart shoppers need to use a few different tax forms.
Here are the most common forms and how each one works.
The 1099 form is a form that details earnings outside of a traditional job.
Since you’re an independent contractor, this is the form that Instacart will send you.
Instacart has until January 31st to send a 1099-NEC to all shoppers who earned at least $600 in the previous year.
You should give the company your address so that they can mail you the form to use when you file your taxes.
A Schedule C is the form you will use to report your earnings and losses as a contractor or business owner.
Instacart is not responsible for sending you this type of form.
However, you will need to use your 1099-NEC to fill out the Schedule C.
If you hire an accountant or use tax preparation software, you can get assistance to fill out the form correctly.
You can also download a Schedule C from the IRS website.
That’s nice if you’re filing your taxes through the mail and without the help of an accountant.
Like the Schedule C, Instacart doesn’t send you a W2.
A W2 form is only for traditional part-time or full-time employees.
However, you may receive a W2 from another company if you have a day job.
If that’s the case, be sure to keep the W2 with your 1099 so that you don’t miss any income when filing your taxes.
Supporting Documents & Statements
Along with various tax forms, you should keep track of some other documents throughout the year.
That way, you can prove you’re eligible for things like tax deductions.
As an Instacart shopper, you will probably be driving a lot throughout the year.
Be sure to track any expense receipts for your driving, such as gas or car repairs.
You can keep the receipts in a folder or scan them to your computer.
That way, they’re all in one place and easy to calculate to file your tax return.
You should also maintain a valid driver’s license for as long as you’re a shopper.
Having a license means you’re still eligible to drive for Instacart.
You’ll also need a driver’s license or some other official ID to file your taxes.
That way, you can prove you are who you say you are.
That Year’s Tax Statements
You may also want to keep a copy of your tax statements for each of the quarterly payments you make.
Then, you can prove you already paid a certain amount in taxes.
Keeping a record of the yearly taxes for the prior year can also help.
If you make about the same amount the second year, you can better estimate how much you’ll need to pay in taxes.
Any Other Documents That Support Taxes
It can also help to keep any documents you can think of that might help with your taxes.
These could be receipts for anything related to your car or other costs of shopping for Instacart.
Instacart Tax Deductions
While contractors are responsible for all of their taxes, they do have a few unique benefits.
As your own boss, you’re able to deduct certain expenses from your taxable income.
Consider why this matters and what you can deduct from your taxes.
That way, you can understand how to account for your taxes.
The Importance of Tax Deductions
Whether you make a ton of money from Instacart or just some side income, you should take advantage of tax deductions.
They can be an excellent way for you to save money at the end of the year.
Being a shopper can get expensive, and you probably won’t pocket all of the money you earn, even after taxes.
Don’t be afraid to report certain expenses to deduct from your taxes.
The Difference Between Personal Deductions and Self-Employed Instacart Deductions
Personal deductions include personal assets, such as property taxes, charitable donations, and education tax credits.
They aren’t for any job or business you have.
On the other hand, self-employed Instacart deductions refer to any deductions related to your Instacart shifts.
That can include things like gas, maintenance, and similar expenses.
What Can I Write Off on My Taxes for Instacart?
Knowing what you can and can’t write off on your taxes for Instacart is crucial.
That way, you can keep from paying a ton in taxes.
But you can avoid penalties for avoiding taxes.
Consider some of the most common self-employment tax deductions for Instacart shoppers.
Because you have to drive a lot for Instacart, you can track your car’s mileage.
Then, you can deduct a certain amount of money based on the number of miles you drive in a year.
And because you need to use your phone to track orders, you can deduct some phone costs.
If you only use your phone for Instacart, you can deduct more of the cost than if you also use it for personal stuff.
You might also need to pay for delivery gear, such as insulated bags or even good shoes to wear when working in the winter.
If you live in an area with toll roads, you can track the money you spend on that.
Then, you can deduct those payments from your income.
The same is true if you have to pay to park in front of a grocery store.
Unless you qualify for health insurance through a parent, spouse, or your own day job, you may be able to write off the cost of your health insurance premiums.
Roadside assistance is another cost to consider.
If you spend money on it for Instacart shopping, you can deduct it from your taxable income.
Finally, you might also be able to deduct money you spend on software or subscriptions.
For example, maybe you pay for a hotspot to use when shopping, so you deduct that from your income.
Does Instacart Track Mileage?
Instacart uses estimated mileage to calculate the payment for orders.
However, that isn’t a form of mileage reimbursement, so you can use the tracking information for your taxes.
If you want to make sure your mileage is accurate, be sure to track it yourself.
You can use an app like QuickBooks Self-Employed or Stride Tax to track these.
Or you can look at your car’s odometer before and after each order to track the distance manually.
Recommended: Use a CPA or Tax Software
Instacart taxes can be complex, especially if you have other self-employment income.
Because of that, you may want to get tax advice from a certified public accountant (CPA).
Alternatively, you can use tax software to help file your taxes.
Consider some of the best software options for self-employed individuals and taxes.
TurboTax has multiple tiers, including one for self-employed people.
You’ll need to get that tier to get access to forms like a Schedule C.
The software will ask you questions in a way that’s easy to understand.
Then, TurboTax will use your answers to fill out the proper tax forms.
If you need more assistance, you can even pay extra to speak with a tax expert.
That can cost less than hiring an accountant, but you will get the help you need.
We are aware that there is an Uber TurboTax partnership that exists that was created for Uber drivers.
It’s worth reaching out to TurboTax to see if Instacart also has a similar agreement.
2. H&R Block
H&R Block is a tax preparation company that you can work with to help prepare your taxes.
You can send your taxes to the company, and an accountant will do the work for you.
However, H&R Block also has tax software that you can use to file your taxes yourself.
Like TurboTax, H&R Block makes filing your taxes less confusing.
And if you need more help than the software can offer, you can visit H&R Block.
That way, you can make sure your taxes are accurate.
TaxAct is another option to consider when looking for tax software.
They offer a self-employed edition, which has everything you need to file your Instacart taxes.
Like TurboTax and H&R Block, TaxAct can connect you with tax experts.
So if you get stuck with the software or want someone to look over your work, you can do that.
4. QuickBooks Self-Employed
QuickBooks Self-Employed doesn’t help you file your taxes, but it can help you track your income and expenses throughout the year.
The app will even track your mileage.
It will also tell you how much you should pay in quarterly taxes.
The program will overestimate what you owe to keep you from having to pay a penalty later.
Plus, it integrates with TurboTax, so you can save time when filing your taxes.
And you can pay for both programs with one subscription.
Frequently Asked Questions
If you still have questions about Instacart taxes, you’re not alone.
Here’s what you should know.
How much do you have to make to get a 1099?
You need to make at least $600 from Instacart in a calendar year for them to send you a 1099.
How do I show proof of income with Instacart?
You can take a screenshot of your earnings to show proof of income.
Do this either in the Instacart app or in your bank account.
What is the business code for Instacart?
The business code for Instacart is 7299, and the NCAIS code is 812990.
Whether you just started or have been a shopper for years, you should know what to expect when it comes to Instacart taxes.
Like other forms of income, you will need to pay taxes on the money you earn as a shopper.
Fortunately, taxes are similar to other independent contractor work.
So if you’ve been a contractor before, you don’t have to learn anything new.
Are you an Instacart shopper? Start tracking your income and expenses now to make tax time less stressful.