Does Instacart Take Out Taxes? Ultimate Tax Filing Guide
If taxes drive you crazy, you’re not alone. Whether you choose to work for Instacart full time or part time, it is important to be in the know about taxes.
Of course you can always get help consulting with a tax advisor but you do not have to be an expert to understand the basics.
So does Instacart take out taxes?
The short answer is that if you are an Instacart full time shopper Instacart will not take out taxes and if you are an in-store shopper, yes.
However, understanding how Instacart and taxes work is really important. We choose to make it simple for you.
In this complete guide of Instacart taxes for dummies you will find all the answers you need and important information to maximize your income with tax deductions.
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As an independent contractor, Instacart shoppers are responsible for paying their own taxes. Instacart does not withhold taxes from shopper earnings and shoppers are responsible for reporting and paying taxes on their income to the IRS.
KEY SECTIONS
You may be wondering whether you are required to pay taxes on your Instacart earnings. The answer to this question is really important and will also help you to figure out how much you can make working for Instacart.
Whether an employer withholds taxes or not it depends on whether you are classified as "employee" or "independent contractor."
In order to make this determination, every company should examine the individual's relationship between the worker and the business.
Basically, whether or not a worker is an employee or an independent contractor is a legal determination.
According to the IRS an individual is an independent contractor if the payer has the right to control or direct only the result of the work, not what will be done and how it will be done. Small
Instacart is one of the best grocery delivery apps also offering pickup services in the United States and Canada. The company is growing fast and planning an IPO in the following months. In the grocery delivery platform there are different job opportunities.
As a general rule, employees have little control over their work, while independent contractors have a high degree of control over their work.
If a worker turns out to be an independent contractor, the business must still report the amount paid to the worker to the IRS, if it is $600 or more. The company will report this income on IRS Form 1099-Misc.
Over the last few years the workers classification has been controversial.
Instacart Shoppers are independent contractors and responsible for their own taxes. As a self employed, you pay taxes on your net income, which is your total income minus any business tax deductions.
This also applies to many people who work in the Gig Economy. If you drive for Uber, deliver with DoorDash or work as a freelancer in the Upwork platform you are considered an independent contractor.
This means that you have to pay self employed taxes including social security and medicare taxes.
Basically, full service shoppers pay taxes on the money they made shopping and delivering. You can check your income on the Instacart earning statement.
On the platform, in-store shoppers are Instacart employees. This means that the San Francisco headquartered company is responsible for payroll taxes and it is required to withhold and pay taxes for those workers who are classified as employees.
Instacart withholds from the In-Store shopper’s wages:
There are two different types of Instacart tax documents: the W-2 form and the 1099 form.
If you are an Instacart contractor and your earnings exceed $600 in a year you will get a 1099-NEC (Nonemployee Compensation). Your 1099 tax form will be sent to you by January 31.
Some websites try to add confusion. Life is already so complicated... Keep it easy. Understanding the difference between a 1099 MISC does not really matter.
Here are some important information about the 1099 form:
💡 PRO TIP: We suggest you keep accurate records of your Instacart earnings. Create an excel file and fill out monthly with your earnings using the Shopper app.
You will only receive a W2 form if you are an Instacart employee. The tax year end date is 31 December. So when do you get the W2? Every employer must send a W-2 to all the employees no later than January 31.
If you do not know how to file Instacart taxes you are at the right place.
Are you looking for ways to make more money with your Instacart side hustle? Start by keeping track of your business expenses.
The first step of the Instacart shopper taxes is to calculate your estimated taxes and proactively pay estimated income taxes on a quarterly basis.
The IRS establishes the deadlines for the payment. We suggest you put a reminder on your phone. Missing quarterly deadlines can mean accruing penalties and interest.
Find below the IRS quarterly estimated tax payment timeline:
Now that you know that your gig income is taxable, you may have to file income tax returns. As an Independent contractor, Instacart shoppers must file Schedule C to report their business income and expenses. You will pay income taxes to the state where you live and work.
Download 1040 form to file a personal income tax return and report the income you received through the year.
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Business expenses are deductible and lower your taxable business profit. According to the IRS, to be deductible, a business expense must be both ordinary and necessary. There are different types of expenses. The first step is to make the difference between personal expenses and other expenses you have for business purposes.
Here is a list of commun Instacart tax write offs:
The IRS requires receipts for expenses. According to the IRS, the proof of payment should identify:
The proof of expense is a key element in the process of managing taxes. Example of proof of expenses are:
Since you do not get paid for gas, mileage deductions are really important for delivery drivers. The mileage tax deduction rules allow you to claim $65.5 per mile in 2023 if you are self-employed. Take a look at our guide on how to track mileage for Instacart.
Finally we suggest you be really rigorous keeping track of all your business write offs in a deductions worksheet.
💡 PRO TIP: Instacart doesn't pay for mileage however, factors like mileage goes into determining how much money you make with Instacart.
Instacart uses Stripe to file 1099 tax forms that summarize your earnings. This means that all Shoppers who earn $600 or more within a calendar year will receive a 1099 form via Instacart’s partnerships with Stripe.
If you have a Stripe Express account and consent to e-delivery, you can get Instacart 1099 online.
Indeed, your Instacart 1099-NEC tax form should be available for download via Stripe Express.
So, when does Instacart send 1099 forms if I don't have a Stripe account?
Instacart will mail you a copy of your 1099 forms by January 31. However if you didn’t receive it you can contact the Instacart driver support and send an email at 1099@instacart.com to request the form.
Although you can work as an Instacart shopper or you can do other odd jobs and collect unemployment benefits, you are required to report all the money you are making with Instacart to unemployment.
Depending on your Instacart earnings, they'll adjust your unemployment benefits.
As for Instacart, they will not report your earnings or labor status to government agencies.
There are no paystubs when you are a self employed contractor for Instacart or other gig jobs. Self-employed people usually don't receive a paycheck. So if you are a Full-Service Shopper, you will never get an Instacart pay stub
The business code is the six-digit code describing your primary business activity that you will enter on your Schedule C.
The business code you have to enter for ontacart is: 492000. This code is the same for other delivery jobs.
The Instacart EIN number Employer identification number (EIN) is: 46-0723335 ;
The self-employment tax rate is 15.3% of the first 92.35% of your net earnings from self-employment.
To be more exact you must pay a 12.4% Social Security tax and 2.9% Medicare tax on your 1099 income.
If you made less than $600 with Instacart, you are still required to report and pay taxes on your income. However, Instacart is not required to provide you with a 1099 form.
For Instacart shoppers, tips are an important part of their earnings. If you want to figure out if tips are taxable the answer is yes. If you already know how tipping works on the Instacart platform, you know that customers can tip you in-app or cash. Tips are taxable income. This means that you are supposed to report your tips, even cash tips, received while working with Instacart.
Understanding taxes can be a challenge. Now you know that if you are an Instacart shopper, you're an independent contractor who provides a service, not an employee. That's why Instacart doesn't withhold taxes from your payments. This is also the reason why Instacart reports your earnings on 1099 forms, rather than on a W-2.
You also know what you can write off on your taxes for instacart and get the most of your deductions. Happy taxes!
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