Anytime I think about taxes, I think of the unnecessary and unavoidable journey of pain I am about to embark on. For most Uber drivers in the United States, I am sure it is the same and as such, we decided to do a Question and Answer session (Q & A session) centered on Uber Taxes with Anil Melwani, the president of a tax firm, who has over 16 years of experience in Accounting.
Anil is very knowledgeable about taxes as it affects Uber drivers, and workers in the “on demand” (gig) industry as a whole, as shown in his responses below. Read the full Q & A below to find out his expert opinion and general thoughts as it relates to Uber and your taxes.
a)What is your name?
b)Where do you work, and what is your position/title?
I work at 212 Tax & Accounting Services and I am the President of the firm.
c) What does 212 Tax & Accounting do?
We operate a full service C.P.A. (tax and accounting) firm.
d)How long have you managed your own company?
e)What is your general opinion on the Uber business?
I love Uber. I use it for work purposes. I also use Uber for me and my family almost every day. The typical Uber is usually much more comfortable for us to ride in than a yellow cab. We [my family] live and work in Manhattan.
f)Where do you stand on the widespread notion that Uber is disrupting long held industry regulations? (specifically relating to W2 vs independent contractor classification of workers)
From my understanding most if not all Uber drivers are treated as independent contractors. As a licensed C.P.A who focuses on preparing and filing tax returns for individuals and businesses, this seems completely fine and legal to me.
g)What would happen to Uber drivers in the US, if they become classified as W2 employees?
It probably won’t be beneficial for most of them, because they won’t be able to write off and take advantage of the several tax deductions that they are able to as independent contractors. But on a W-2, Uber would be responsible for paying half of the self-employment taxes (FICA/SS [social security] and Medicare taxes), so it wouldn’t be all bad for the drivers.
h)What are the major differences in taxation between someone driving for Uber full time and someone driving part time.
i)Do I have to make quarterly tax payments, as a self-employed person in a part-time Uber driver role?
Most self-employed taxpayers should be PAYING (not filing) their taxes quarterly in the form of estimated tax payments.
j)What are the various types of tax considerations that impact an Uber partner and/or driver?
- An Uber driver needs to make sure that the depreciation on the cost of his/her vehicle is calculated and reported correctly. This is probably the most confusing issue for most Uber drivers.
- An Uber driver also needs to keep track of the car mileage and Uber trips just in case of an IRS audit.
- Making sure you are keeping good books, records, receipts, and invoices of all business related expenses such as gas, insurance, repairs & maintenance, license fees, cleaning, car wash, cell phone / Wi-Fi / computer and internet costs.
k)What does an Uber driver need to do from the start of the business to ensure that they never have issues when filing their taxes?
Keep good books & records (receipts, invoices, cancelled checks, credit card statements, bank statements) for at least three (3) years. Make sure you review your tax returns to ensure it makes sense. Don’t just sign it and give it back to your accountant to e-file. Consider using some kind of bookkeeping software such as Quickbooks or Xero. There are several other more basic ones out there too like Freshbooks, Mint.com, and Zoho books.
l)What professional advice would you give an entrepreneur hoping to operate a fleet of cars as regards taxes?
Make sure your accountant is calculating the correct amount of depreciation each year on your tax return. This is probably going to be one of your biggest write-offs and you (not your accountant) will probably be liable for additional taxes, penalties, and interest if it is not done correctly. Also, see the previous answer. You should definitely look into using formal bookkeeping software such as Quickbooks or Xero.
m)Would you advise an Uber driver/Partner form an LLC to operate his/her Uber business?
This question should be directed to an attorney. For tax purposes, single member LLCs and regular sole proprietor are treated and taxed the exact same way.
n)Standard Mileage or Track Expenses? What is the better option for an Uber driver/Uber partner?
This is decided on a case by case basis for whichever is better for the taxpayer, but once one of the methods is chosen you must stick to that method for the life of the vehicle.
o)What are the top deductions that an Uber driver needs to track?
Gas, insurance, repairs & maintenance, license fees, cleaning, car wash, cell phone, Wi-Fi, computer and internet costs.
p)What is likely to happen if an Uber driver doesn’t report the income made driving for Uber?
They will first receive a notice from the IRS and then if they don’t file an accurate return at that point they will have much serious issues with the IRS and State they are earning income in. It is ILLEGAL not to declare ALL income. Most WORLDWIDE income is reportable (and sometimes taxable) for U.S. citizens and green card holders.
q)Can our readers reach you, if they are looking for help with their 2015 taxes?
Of course! We are at 212tax.com and 212-475-1040.
r)Any last words?
File your taxes early if you can. We LOVE early filers!!
For more information about Anil Melwani, and to drop him a note follow the links below:
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- Uber Car Requirements: 580 UberX Cars Analyzed.
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