Key Takeaways
- Tax Obligation: All Instacart workers must file taxes if earnings exceed $600. In-store shoppers receive a W-2, while full-service shoppers get a 1099-NEC.
- Different Forms for Shoppers: In-store shoppers file taxes like traditional employees. Full-service shoppers file as self-employed and must manage quarterly tax payments.
- Key Tax Forms: Full-service shoppers use forms like 1099-NEC, Schedule 1, 2, C, SE for reporting income and expenses.
- Tax Deductions: Instacart workers can deduct business-related expenses like vehicle costs and phone bills, but only for the portion used for work.
Working as an Instacart Shopper can be a great side hustle or even a full-time gig if you live in a populated place with many shopping requests.
However, like any job, Uncle Sam requires you to report your earnings around tax time.
If you’ve only ever held traditional jobs before, filing taxes as a freelancer—or independent contractor, as Instacart sometimes calls you—is entirely different.
Knowledge is power, so gear yourself up for this year’s tax deadline by learning what’s required of you by the IRS as an Instacart shopper and/or deliverer.
Do You Have to Pay Taxes If You Work for Instacart?
Regardless of how you work for Instacart, you’re required to file taxes for the work you’ve done within the last tax year if you made over $600 through the service.
If you’re an in-store shopper (i.e., you don’t do any deliveries), your tax process will be a lot more straightforward. You can file them the same way any traditional employee would.
Rather than request any tax forms, Instacart will send you a W-2 that details your earnings through the service for the last tax year. Since Instacart took out tax payments each time you received a check, your owed taxes should be lower.
But the process is completely different if you’re a full-service shopper. Although you offer more services for Instacart, including shopping and delivery, you’re regarded as self-employed rather than a part-time employee, like in-store shoppers.
Since you’re self-employed, tax time becomes trickier. Rather than receiving a W-2, you’ll get a Form-1099-NEC, or Nonemployee Compensation.
As an independent contractor, you pocket 100% of your earnings from Instacart throughout the year. While this is great for you at the moment, it’s not so fun around tax time.
You’ll have to pay all the taxes you didn’t pay throughout the year in April, June, September, and January. You’re also charged a self-employment tax.
Brett’s Take: Thoughts From an Expert
I am a 1099 contractor for various platforms – from Instacart to Uber. Because of this, I know that none of the platforms paying me are withdrawing taxes from my earnings, so I make sure to plan ahead.
Most Instacart Shoppers set aside 20-30% of their earnings for taxes. Personally, don’t think this is enough, so I move 50% into a high-yield checking account that I have set up specifically for taxes.
50% is way more than I need, but come tax time, I’d rather have a surplus than a deficit. Being disciplined in this way allows me to avoid spending money that I might eventually end up owing in taxes.
Once the American tax system decides you owe it money, there’s very little room for reasoning or excuses.
If you don’t have the money when you owe it, you’ll likely see penalties assessed for every day you’re late in your payments. Or, they’ll just garnish your wages from your W-2 paycheck until they’re made whole.
How to File Instacart Tax for In-Store Shoppers: Step-By-Step
Let’s bang out the steps in-store Instacart shoppers should follow to complete their taxes.
Step 1: Receive Your W-2 in the Mail
Start checking your mailbox around January, as that’s when Instacart should issue your W-2 form.
Although the tax deadline isn’t until April, it’s customary to send tax forms early to ensure you have enough time to file months before the deadline if you’re interested.
If you’re closer to the deadline and you still don’t have the tax paperwork, you can reach out to Instacart Help for assistance.
Step 2: Compare Your Numbers Against Theirs
Once your W-2 arrives in the mail, open it and carefully review the information.
You should have tracked your earnings throughout the year to manage your finances, so you’re looking to see whether your numbers and Instacart’s match.
Hopefully, there aren’t any discrepancies, but you should report them to Instacart if you’re certain their amounts are incorrect.
Step 3: File the W-2 at Tax Time
File your Instacart taxes by the April 15th tax deadline. If Tax Day is on a weekend, the tax deadline is whenever the next business day is, usually a Monday.
Brett’s Take: Thoughts From an Expert
I highly suggest seeking a qualified tax professional to help you navigate your taxes – especially if you’re new to working as a 1099-contractor.
Your tax situation can be influenced by dependents, other jobs, and additional income sources. These factors can affect your tax rate and potential deductions.
In addition, make sure to keep all relevant documentation and extensive notes, including receipts and mileage logs, for at least six years in case of an audit.
Step 4: Make Quarterly Tax Payments
Quarterly taxes for the prior tax year begin as early as April, so begin paying yours. I suggest not trying to do these payments yourself, as it can get pretty confusing pretty quickly.
A freelance accountant or bookkeeping can help you keep track of these payments. You can oftentimes hire somebody for a few hundred dollars per year.
Or, you can use a low-cost solution like QuickBooks, which syncs to your bank account and automatically estimates how much you owe every quarter.
Tax Forms and Guidance for Full-Service Instacart Shoppers
As a full-service shopper on Instacart, you’ll have far more paperwork to file and larger tax payments to make. Let’s review the documents you need to file by the tax deadline.
Form-1099-NEC
The form you need to file isn’t a standard 1099 but a 1099-NEC for independent contractors. It’s a short and simple enough form requiring the following information:
- Full name
- Home address
- Taxpayer Identification Number or TIN
- Nonemployee compensation
- The amount of federal income tax withheld
- The amount of state tax withheld
- State income
Copy A of 1099-NEC goes to the Internal Revenue Service Center. You’re also required to submit Form 1096 when filing.
This tax form requests your full name, home address, phone number, email address, Employer Identification Number (EIN), Social Security Number (SSN), the total number of forms you’re sending, the federal tax amount withheld, and the total income on the form.
Copy A goes to your state tax department, and Copy B is your copy.
Schedule 1
Schedule 1 of Form 1040 may be required when you file your Instacart taxes as a solo limited liability company or a sole proprietor.
This IRS form has two parts related to your income. In Part I, Additional Income, report any taxable credits or refunds and business income. Leave any sections blank if you didn’t make money from these sources.
In Part II, Adjustments to Income, you can claim any appropriate business adjustments.
Schedule 2
Next, complete Schedule 2 of Form 1040, another two-part form.
Part I, Tax, requires you to include excess advance premium tax credit repayment with Form 8962 and alternative minimum tax with Form 6251, then add the values.
Part II, Other Taxes, includes values for self-employment tax and other additional taxes.
Schedule C
The third tax form for independent contractors working for Instacart as LLCs or sole proprietors is Schedule C of Form 1040, Profit or Loss from Business.
As that name tells you, this form breaks down your earnings. Under Part I, Income, report your gross income for the year through Instacart.
Part II, Expenses, is for the business expenses you can deduct as part of your gig shopping for and delivering groceries.
Part III, Cost of Goods Sold, covers supplies and materials.
Schedule SE
That brings us to the last tax form for full-service Instacart shoppers, Schedule SE of Form 1040, Self-Employment Tax. This form will help as you gear up to pay Instacart taxes.
Part I, Self-Employment Tax, requires a detailed overview of your losses and profits for the most recent tax year.
Part II, Optional Methods to Figure Net Earnings, only applies if you made under $7,103 from Instacart and being a shopper and deliverer was below 72.189% of your yearly income.
Your self-employment net earnings must have exceeded $400 for two of the last three years.
Did you know?
Instacart doesn’t offer pay stubs, but they do offer an easy way to verify income as a shopper.
If you need to verify your income for some reason, this is a great feature to try.
Tips for Filing Instacart Tax Paperwork
These pointers will ensure you ace your taxes and avoid late payments.
1. Know Where to Find Your Income
Remember, as a full-service shopper, it’s on you to track your revenue. You should do this even if you’re an Instacart shopper, as it’ll help you compare numbers when your W-2 comes in.
You probably live on the Instacart app for work, right? Well, fortunately, all the information on your earnings is contained within the app.
Tips count, as do additional payments customers might leave, such as for the holidays. You also have to add your Instacart guaranteed pay.
Since your tax forms aren’t Instacart-specific, you don’t need separate lines for guaranteed pay versus tips. You can add everything together.
2. Take Advantage of Deductions
You incur more business expenses than the average person as an Instacart worker. When filing your paperwork, add tax deductions like the following:
- Parking fees
- Registration costs
- Tolls
- Insulated grocery bags
- Vehicle depreciation
- Auto loan interest
- Car cleaning
- Car insurance
- Car washes
- Car inspections
- Oil changes and routine maintenance
- Car repairs
- Fuel
- Coolers and other equipment to keep food cold
- Business-related phone costs
Instacart tax deductions are handy because you can write them off when you pay Instacart taxes, lessening the wallop of quarterly payments.
However, the above tax deductions only include the business portions. Let’s explain.
When you use your car for both Instacart deliveries and personal errands, such as taking your dog to the park or heading to the gym, you can’t deduct the entire cost of vehicle expenses from your taxes. You’re not using the car exclusively for work.
You can calculate the difference by monitoring what you pay for gas and repairs for work and the number of miles you drive when on the clock. Likewise, track the number of texts you send and the minutes you spend on the phone for work.
Multiply these numbers by an average rate, and you’ve got your deductions.
Pro Tip:
Mileage tracker apps are a great way to automatically keep track of mileage that you can write off during tax time.
Many of the apps on our list can also track expenses, making writeoffs simple and stress-free.
Don’t Miss Payment Deadlines (Set Up Auto Payments)
Tax time can be painful for the self-employed, but life goes on. Since it’s at least three months between one tax payment and another, enroll in automatic payments so you don’t miss a deadline.
The auto-payments will deduct the amount owed from your bank checking or savings account. You must have at least that much money in your account for the payment to go through.
How Much Do You Pay on Instacart Taxes?
That depends on what you earn from Instacart. At the very least, you’ll pay 10% of your taxes.
If you’re a heavy-duty earner, which can happen if you’re a full-service Instacart shopper, you could pay as much as 37%.
Remember, there’s the self-employment tax to contend with. Since you’re the employer and employee as a full-service shopper, you pay the standard 7.65% twice over for a grand total of 15.3%.
Wrapping Up
Instacart tax time doesn’t have to stress you out. Although you have far more tax forms to fill out as a full-service shopper than you do as an in-store shopper, now that you know which forms to complete and how, you’re ready to send your paperwork in before the deadline and pay taxes.
