- Shipt shoppers pay self-employment tax; no taxes withheld by Shipt.
- Keep accurate records for deductions like mileage and mobile phone use.
- Use tax software or a professional for filing; Shipt provides 1099 forms.
- Deduct business expenses like shopping supplies; separate personal and business finances.
Do Shipt Shoppers Pay Taxes?
Shipt does not withhold taxes from their payments, so shoppers need to file and pay their own taxes.
The self-employment tax rate is typically 15.3% on 92.35% of the net profit, applicable only if annual earnings exceed $400. Shipt shoppers are advised to make quarterly tax payments to avoid late penalties and should maintain accurate financial records for smooth tax filing.
Essential Tax Forms for Shipt Shoppers
Unfortunately, paying off your taxes isn’t as easy as taking money out of your wallet. You’d have to fill out a few forms first, covering your annual income, tax credits, and any claimed expenses.
There are three main forms you’ll encounter while filing for Shipt taxes:
1. 1099-NEC Form
When dealing with Shipt taxes, the primary document is the 1099-NEC form. This form acts as a report of your earnings for tax purposes, to be filed with the IRS if you meet the criteria for tax submission.
You will receive this form if your earnings are $600 or more. It’s essential for determining the amount of tax you owe. All gig workers and independent contractors, including those working for Shipt, must use this form to file their taxes.
2. Schedule C
The Schedule C form is a detailed record of your business income and expenses. This includes various costs such as maintenance and fuel expenses.
When submitted to the IRS, this form is used to determine your business profit by comparing your total income with your expenses.
3. Schedule SE
The Schedule SE form documents your self-employment taxes, serving as an official record of the amount due to the IRS. It’s required if your annual earnings from Shipt are $400 or more.
For independent contractors, such as Shipt drivers and shoppers, the self-employment tax contributes to Medicare and Social Security.
Deductions Specific to Shipt Shoppers
Though Shipt shoppers get paid well, the paycheck may become a lot thinner after paying all your taxes. Luckily, there are plenty of deductions you’re eligible for if you work as a Shipt shopper.
If you’re looking for Shipt tax deductions, the first thing you should consider is mileage and car payments. As a Shipt driver or shopper, you need a car to do your job, which makes all car-related expenses (on the job) deductible by law.
To get a mileage deduction, you need to monitor how many miles you drive for Shipt annually with record proof of it. Then, calculate how much tax deduction you’re up for by checking the IRS’ mileage deduction per mile.
If tracking your mileage is too much of a hassle, you can download a GPS app that tracks it for you. Some apps create IRS-compliant reports for gas mileage, so you won’t have to lift a finger to get your deduction.
2. Mobile Phone Use
As a Shipt shopper, you can’t do your job without a phone, which automatically means mobile phone use is deductible. If you have a phone for business use only, it’ll be easier to track all phone-related expenses and get a report documenting it.
If you have a single phone for personal and business use, you’d have to go through your phone records and calculate how many phone calls go out during work hours. You’d also have to do the same for internet data.
You can do this process for one or two months, get an average, and apply the same number to the rest of the year.
3. Shopping Supplies
Any supplies you use for Shipt shopping can be deducted from your tax payments.
For example, you may need insulated bags to keep food cold. In that case, those are considered business expenses. Likewise, GPS units, chargers, and any items you use for Shipt orders can be eligible for deduction.
However, to be eligible, you have to keep proof of every business expense you paid. We know that means keeping a lot of paper receipts around, but it’s the only way to get your full deductions.
Filing Taxes as a Shipt Shopper
Filing taxes, particularly for complex cases, often leads people to seek professional help. For simpler situations like self-employment tax, tax software presents a cost-effective alternative.
While hiring a tax professional guarantees accuracy and provides personalized assistance, it can be expensive. Tax software, on the other hand, is more affordable but may involve risks such as potential errors and lacks personalized advice.
For those accustomed to tax filing, tax software can be a practical choice. It simplifies the process with automated tax calculations, detailed filing instructions, and assistance in organizing quarterly payments. The software may also suggest potential deductions and payment methods.
Here’s a quick overview of the tax filing process for Shipt shoppers:
- You’ll receive your tax forms by mail once your earnings from Shipt exceed $600. If not, you can download them from the Shipt app’s Account section.
- Complete and submit these forms to the IRS.
- Finalize your tax payment via the IRS website, by mailing it with the 1099 form, or through the IRS2go app.
Tips for Managing Taxes Throughout the Year
Managing taxes isn’t a walk in the park. You have to keep receipts, document expenses, and make sure to fill out your forms on time. Because we know how challenging it may get, here are some tips to help you navigate the daunting task:
- Use applications for tracking your expenses instead of documenting everything yourself. Some applications will even create IRS-compliant reports that you can use instead of writing your own.
- Don’t mix your personal and business financials to avoid any mishaps. If you happen to have an audit for any reason, the IRS may reject your deductions if they’re mixed in with your personal expenses.
- Set time aside for bookkeeping either monthly or weekly to make sure your financials are constantly updated.
- If applicable, create a bank account only for tax payments to keep them separated from your earnings. That way, you make sure your tax payments are covered without having to take a chunk out of your personal account each quarter.
Resources for Shipt Shoppers During Tax Season
During tax season, everyone is asking questions, sharing insights, and providing useful information. It’d be wise to stay in contact with fellow Shipt shoppers, so you can stay updated and within the loop.
There are plenty of Facebook groups for Shipt shoppers that can offer you support when you need it. If you need a tax-oriented community, you can always join tax forums and see what fellow independent contractors are up to.
Other than that, you can always go to the IRS for help. They offer plenty of guides to taxpayers, and you can find plenty of documents dedicated to self-employment taxes.
Filing taxes as a Shipt shopper is a straightforward process, and it gets easier when you have a solid bookkeeping strategy in place.
As long as you keep track and digital proof of your expenses, you should be able to get your deductibles without a hassle. It’d also be easier to keep your business expenses separate from your personal ones, so you avoid common mistakes
If tax season is closing in, you can start joining Shipt shopper hubs and groups to stay up to date with tax filing dates. You can also start looking for tax software if you intend to use one.