There are only two things you cannot escape in life – taxes and death. The former at least you can prepare for. To help you prepare for your upcoming tax filing we did a Question and Answer session (Q & A session) with Micah Fraim, a very knowledgeable CPA (Certified Public Accountant) and owner of his own Accounting firm.
If you are interested in Uber Taxes, Micah is very knowledgeable about taxes as it affects Uber drivers, and workers in the “on demand” (gig) industry as a whole: 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 am the owner of Micah Fraim, CPA.
c)What does your job entail?
My job includes advising clients on all aspects of their businesses with a focus on tax planning, business planning, and marketing advisory services.
d)What is your general opinion on the Uber business?
It is a nice secondary option to traditional cabs and can (in some cases) be a good way to make money on the side.
e)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)
I was surprised by the decisions in California and Florida because in many ways Uber drivers fit the classification criteria to be considered 1099 subcontractors.
f)What would happen to Uber drivers in the US, if they become classified as W2 employees?
There are two major shifts that would occur if Uber drivers became classified as W-2 employees:
- As 1099 subcontractors, Uber drivers are de-facto self-employed. This means that they are responsible for both sides of Social Security and Medicare on any profit. It also means that any expenses in their business are fully deductible
- As W-2 employees, Uber drivers would only be responsible for paying half of Social Security and Medicare taxes while Uber would pay the other half; however, deducting their expenses becomes much more difficult. As W-2 employees, Uber drivers will now become “unreimbursed employee expenses” that fall under itemized deductions. Two things happen here:
- In order to deduct the expenses, total itemized deductions must exceed the standard deduction ($6,300 for single taxpayers and $12,600 for married couples)
- The unreimbursed expenses are subject to a threshold of 2% of your Adjusted Gross Income. That first 2% gets disallowed automatically.
- So while the notion of classifying Uber drivers as employees on the surface sounds like a favorable change for them, it might actually end up costing them money in some cases – unless Uber reimburses them for expenses as well.
g)What are the major differences in taxation between someone driving for Uber full time and someone driving part time?
From a tax standpoint and under the current setup, there is no difference between driving Uber full time and driving part time. Note- Labor commissions like California and Florida might take a different view.
h)Do I have to file quarterly tax reports, as a self-employed person in an Uber driving role?
The only quarterly forms that are required (unless the driver runs payroll for themselves), would be quarterly estimated tax payments to the IRS and state. Failure to do so will result in a small penalty for not paying throughout the year.
i)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?
Good record keeping and planning from the start of your Uber business are vital. Keeping track of all expenses, monitoring your profit, and setting aside money for tax payments are all very important because there is no employer to do any of that for you.
j) What professional advice would you give an entrepreneur hoping to operate a fleet of cars as regards taxes?
Cash outflows do not always equate to reductions in taxable income. If you take on debt, the principal portion of the loan repayments is not an expense for tax purposes. Be very careful in your planning to make sure these discrepancies do not get you into trouble.
k) Would you advise an Uber driver/Partner to form an LLC in order to operate his/her Uber business?
A single member LLC can make sense from a legal standpoint to potentially shield against liability, but from a tax standpoint an LLC is treated the same as a sole proprietorship. In the right situations an S-Corp can make sense and save you on taxes.
l)Standard Mileage or Track Expenses? What is the better option for an Uber driver/Uber partner?
For most vehicles (and over the long-term) the standard mileage deduction is the safer bet. There can always be exceptions, so drivers should at least track mileage as well.
m) What are the top deductions that an Uber driver needs to track?
Mileage and auto expenses are obviously the most important. Beyond that, the business percentage of their cell phone, home internet bill, and other expenses like office supplies, computer equipment, etc. should all be tracked.
n) What tools do you recommend for an Uber driver to use to track their various expenses?
QuickBooks or QuickBooks Online/Xero are good approaches. For very simple bookkeeping a spreadsheet can also work.
o) What is the best way for an Uber driver to estimate taxes for the current year, so they don’t have a cash flow situation come tax time?
Checking in with a tax professional throughout the year is always the best idea. Short of that, setting aside 30-40% of their business profit for taxes can be a good approach.
p) What can an Uber driver do, if he/she does not receive a 1099 from Uber?
Contact Uber directly to ensure one has been issued. Failure to report the income can cause serious headaches down the road.
q) What is likely to happen if an Uber driver doesn’t report the income made driving for Uber?
If the driver makes over $600 in the year, Uber is required to issue the Uber driver a 1099-MISC form and also file that with the IRS. If the Uber driver fails to report the income, the IRS will almost certainly flag it and require payment on the additional income. Note- the IRS’ tax figure will usually be worse than if the driver had actually claimed the income in the first place.
r) Can our readers reach you, if they are looking for help with their 2015 taxes?
s) Any last words?
I’m available for anyone needing their taxes prepared or help growing and managing their businesses
For more information about Micah Fraim, and to drop him a note follow the links below:
To receive professionally vetted information that will assist you in running a profitable Uber business whilst maximizing your profits, download our Uber kit at the top right of this page.
Other Interesting Uber Related Posts
If you liked our post on Uber Taxes, see other informative Uber related posts below:
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- An Introduction to Different Uber Services
- Uber Car Requirements: 420 Uber Black Cars Analyzed.
- Uber Car Requirements: 90 Uber SUV Vehicles Analyzed.
- Uber Car Requirements: 580 UberX Cars Analyzed.
- Uber Car Requirements: 115 UberXL Cars Analyzed.
For other popular posts you might be interested in, check the links below:
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- How to Find the Highest UberX Fares
- How to Become an Uber Driver
- Uber Customer Service