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I started working for Doordash, a food delivery service. Technically I think I am a self-employed contractor.

I saw online that you don't have to declare taxes if you make less than $12,200 in a year. However I also read that you're supposed to declare taxes if you make more than $400 as a self-employed contractor and that you will actually have to pay taxes on everything you make.

Do I have to declare taxes if I make less than $12,200 this year, and will I have to pay taxes on that amount? Let's say I only make $8,000 before Jan 1st for the entire 2020 year; will I actually have to pay taxes on that, and if so how much? I'm in California, single no children, currently living in my car (no property or anything).

Chris W. Rea
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deliveryguy
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    You probably have to file a tax return, but you may not owe any taxes. – chepner Oct 07 '20 at 22:19
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    @chepner, is there a way to figure out if and how much I would owe? I'm trying to figure out how much of the money I make I can spend and how much I should save to pay taxes, because it's going to be pretty tight... – deliveryguy Oct 07 '20 at 22:22
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    Didn't California force all these delivery services stop pretending that they don't have workers, or am I thinking of another state? Just because they want you to think you're not an actual employee doesn't necessarily make it so. One more thing to check. – pipe Oct 08 '20 at 08:42
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    @pipe apparently in the EU the employees of such companies have to be classified as employees. I don't know how that actually works in practice, though. I imagine that the businesses in question have found other ways of underpaying their staff and not paying company taxes. – Aaron F Oct 08 '20 at 10:37
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    @AaronF EU labour laws are quite different from Californian labour laws. – Mast Oct 08 '20 at 11:56
  • @Mast "EU labour laws are quite different from Californian labour laws" indeed they are. I wondered whether pipe was thinking of another continent rather than another state ,-) – Aaron F Oct 08 '20 at 11:58
  • Just a quick clarification question: is this your only income this year? Or are you only talking about your income from Doordash, but not from another job/source? – TylerH Oct 08 '20 at 13:44
  • @AaronF , no, that was California. It's a huge news story, just google for a million articles like https://fortune.com/2019/09/11/uber-lyft-doordash-california-contractor-employee-law/ – Fattie Oct 08 '20 at 14:40
  • @TylerH, this is my only income. I'm sleeping in my car right now looking for jobs, just doing this to survive in the meantime. – deliveryguy Oct 09 '20 at 18:32
  • Also think that internet and phone subscription is required for you to have this job - hence you can put your phone and subscription on the costs. Not sure about per-diems - in EU if you travel for business purposes you have meal allowance do deduct. Folks, philosophical left - right or EU - US discussions will not help the guy. A lot of practical advice was and given and it should stay that way. – Pawel Debski Oct 13 '20 at 18:15

2 Answers2

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Because you're self-employed and make more than $400, you'll need to file a federal return. If you make less than the standard deduction ($12,400 for a single person in 2020), you won't owe any income tax, but you will still owe self-employment tax. On $8,000 of net profit you would owe $1,130 (use an online calculator like this one). Make sure you deduct all expenses to reduce the tax you owe.

Also make sure to look into California's filing requirements.

Craig W
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  • Sorry, I accepted your answer but can't upvote yet. Do you know what the "tax-deductible portion" is for $565? Is that the maximum of expenses I can deduct? – deliveryguy Oct 07 '20 at 23:06
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    @deliveryguy It's complicated but part of the self-employment tax you can deduct because it's technically a business expense. However, this doesn't make much difference to you because you won't owe any non-self-employment tax anyway. There is no limit to the expenses you can deduct, as long as they are legitimate business expenses. – Craig W Oct 07 '20 at 23:12
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    Thanks, that's good to know. I'll make sure to save ~15% of what I make to pay for taxes. – deliveryguy Oct 07 '20 at 23:25
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    @deliveryguy Your most significant business expense will be mileage. In 2020 you can deduct 57.5 cents for every mile you drive on the job. – Ben Miller Oct 08 '20 at 03:00
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    Ben Miller's point is key here. See this article: https://entrecourier.com/2019/08/27/tracking-miles-for-uber-eats/ – Tom Wright Oct 08 '20 at 08:07
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    @TylerH I think you're forgetting about the cost of car maintenance and depreciation. Driving a car has many costs beyond gas. – Kat Oct 08 '20 at 14:20
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    It seems wrong to tax any income (self-employed or not) that is under the self-sustaining minimum (which should be around $1000/month). – Peter - Reinstate Monica Oct 08 '20 at 14:39
  • @Peter-ReinstateMonica Hypothetically DoorDash is paying more than they would to W-2 employees. So although I agree it seems unfair to tax somebody making under the standard deduction, it's really just leveling the field for 1099 workers. – Craig W Oct 08 '20 at 14:47
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    @Peter-ReinstateMonica The tax is really DoorDash paying for doing the equivalent of employing the OP. Were the OP an employee of DoorDash, DoorDash would pay that to the government directly. In a contractor arrangement, DoorDash pays that to the OP who pays it to the government. It's not really a tax on the OP, and the OP gets the benefit of only paying it on income after expenses. – David Schwartz Oct 08 '20 at 23:54
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    @DavidSchwartz I would argue that paying taxes on a fix salary below the subsistence level is also systematically wrong (regardless of whether it's nominally deducted on the employer's or employee's side). – Peter - Reinstate Monica Oct 09 '20 at 06:47
  • @BenMiller-RememberMonica, thank you for the advice, that's really good to know. I got an app (gridwise) that tracks my mileage when I work. Is that proof enough for mileage or do I need gas receipts, pictures of my dashboard, or anything else? Also, that means I deduct 57.5c from what I declare, not what I have to pay, right? So let's say I drove 10k miles by the end of the year and made $6k, I would declare only 6,000 - 10,000 * 0.575 = $250? – deliveryguy Oct 09 '20 at 18:37
  • @deliveryguy You should ask those questions as a new question post. The answer will take a little more room than I want to type in the comment area. :) – Ben Miller Oct 09 '20 at 18:41
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    @BenMiller-RememberMonica, thank you, I started a new question if you want to take a look (https://money.stackexchange.com/questions/131768/taxes-mileage-deduction-for-delivery-worker-and-methods-of-proof), whichever you think works best. – deliveryguy Oct 09 '20 at 18:47
  • @deliveryguy Thanks, I'll look at it. – Ben Miller Oct 09 '20 at 18:48
  • @TomWright, thank you, the article is really helpful. – deliveryguy Oct 09 '20 at 18:52
  • Keep in mind that even if it costs you $1120 in taxes, having filed will put you on the radar to get a stimulus check whenever Pelosi and McConnell agree to agree. – Harper - Reinstate Monica Oct 10 '20 at 15:14
  • @Peter-ReinstateMonica It's hard to avoid that because a single employee can have several jobs each below the subsistence level but together adding up to a wage that we would both agree should be taxed. It makes more sense to give people with low incomes credits, ideally refundable, that can take their entire income picture into account. That benefits both those self-employed and those not self-employed the same way and keeps the system sane and balanced. That's just not the right knob to turn to reduce the tax level for low earners. – David Schwartz Oct 10 '20 at 23:25
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You got this gist of it. However, I don't see anyone mention the Earned Income Credit. I want to say you need to be at least 25, but am not 100% sure on that. https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit

I saw someone else mention mileage and depreciation. I'd be shocked if it is better for you to keep gas receipts and depreciation records (year to year). A mileage log book isn't that hard. It sounds like you don't have a log book. A shame - NOT - since no log book -> no deduction -> higher EITC at your income level. Start keeping one now. Run the taxes both ways.

There is nothing more certain than death and taxes.

Flux
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Jim M
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