6 + MISTAKES YOU MADE on your tax return to get audited by IRS

Feb 25

6 + MISTAKES YOU MADE on your tax return to get audited by IRS

ATTENTION! UBER & LYFT DRIVERS!

1. Relying on Uber to keep track of your mileage

Sure, Uber’s app will keep track of the miles you drive with passengers in your vehicle. But the fact is, the IRS also allows you to claim the distance traveled to get from a drop-off location to where your next passenger is waiting. You can still rely on Uber for a portion of your business miles, but you need to keep track of all the additional mileage to make sure you getting all your deductible miles counted.

2. Double deduct your vehicle expenses

If you use the standard method for calculating your deduction, you should not be deducting itemized expenses in addition to mileage. Itemized costs include things like car washes, gas, maintenance, depreciation, fees, insurance, repairs, oil, tires, registration, or lease payments. The standard method accounts for these and allows you to deduct a flat rate of 58 cents/mile. Writing off these individual expenses when you use the standard method is actually double-dipping. You could wind up with a big penalty from the IRS if you are caught.

3. Not making quarterly tax pay

When you work as a rideshare driver for Uber and Lyft, you are technically a small business owner. That means no one else is withholding wages from your paycheck for income taxes. If driving is your side-gig and you work a second job where you filled out a W-4, you could adjust your tax withholding to cover your rideshare income. If you work entirely for yourself, you are responsible for Paying Quarterly estimated tax. If you don’t, you could be hit with a penalty for underpayment.

4. Not keeping receipts

As a rideshare driver, there are certain expenses you can deduct in addition to mileage. If you use the actual method for calculating your business expenses, you’ll need receipts that back up your claims. If you can’t provide records, the IRS might question the expense. In that case, you could be on the hook for back taxes and penalties. If you don’t keep track of your receipts, you can always take the standard method, which allows you to deduct a flat rate of 58 cents per business mile for all driving-related expenses. Still, you must track your mileage closely to make sure you are getting your maximum deduction.

5. Not Knowing which business expenses you can write-off

Mileage is the most obvious deduction that a rideshare driver can take. But other common operating expenses you should be deducting include your cell phone and wireless plan, tolls and parking, and memberships for roadside assistance. Have you ever wondered if you could deduct for car washes? How about those bottles of water you give your passengers? Knowing which expenses you should write-off can put money back in your wallet at tax time.

6. Forget to deduct “ Driver Safety” Expense

Along with a car phone mount for safe, easy access to your phone while driving, many rideshare drivers invest in other items that keep them and their passengers safe (i.e. dashboard camera). And since you purchased these items for your rideshare driving business, they are tax deductible.

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