Reporting 1099 Delivery Driver Income on Your Taxes in 2023 (2024)

Do gig economy delivery companies report your income to the IRS? Is independent contractor income from Doordash, Uber Eats, Instacart, and others income under the table?

What if you made less than $600 in the past year as a delivery driver? Will you get in trouble if you don't report that money?

Remember that the basis of your taxable income is your profit as opposed to gross income received from delivery companies. All of that is determined by adding income and expenses on Schedule C and figuring out the difference. This article looks at the income side of that equation and will address:

• What earnings go on Schedule C?
• Whether Doordash, Uber Eats, Grubhub, Instacart, etc. report your income
• Do you have to file unreported income?

About this article

This is part of a series of articles about delivery driver taxes in gig economy. We'll link to other parts of the series, and at the end, you can find a list of all articles.

This series focuses on taxes for delivery contractors in the United States. Other countries, as well as some state and local governments, have their own tax regulations that may differ. Many of their concepts may be similar but it would be wise to consult a tax pro to help understand any differences in your area.

Do not take anything on this site as tax advice. The purpose of this series is to educate. You should seek out a tax professional for advice specific to your individual tax situation.

What earnings go on your Schedule C?

The most important part of your taxes regarding your business is Form Schedule C. We go into a lot more detail aboutwhat Schedule C is and all that goes on it.But here it is in a nutshell:

The IRS entitles it “Profit or Loss from Business.” There are three main sections: your business information, income, and expenses. At the end of the form, subtract expenses from income to determine profit (or loss).

This article focuses on the income part of Schedule C. This is about determining how much moneyyour businessmade.

If you are wondering why I'm mentioning ‘your business' so often, there's something critical you should understand. When you sign an independent contractor agreement, you agree to provide services as a business rather than as an employee.

In other words, this is about small business taxes. This part of our tax series discusses your gross earnings: how much total money came into your business?

We'll discuss each income-related question on form Schedule C. There are seven lines in the income section. Which one do we use for our delivery contractor earnings?

Line 1. Gross receipts or sales.

Line 1 is where you enter the total you received for your delivery work. All of your tips and earnings are added up for this one line. If you delivered for several companies, add up your total from all of those companies.

As independent contractors, we report all of our money on a single line.

There's nowhere for us to break down base pay, customer tips, incentives, or referral fees. It all is income.

When I was in telecom, I had several forms of income, such as product sales, commissions from referrals, and service labor. The IRS didn't care about all that. All they wanted was the total amount.

How do you know how much you made?

Suppose you made more than $600 from any gig company (such as Grubhub, GoPuff, DeliverThat, or any of the more prominent companies). In that case, they'll send a 1099 form reporting your income.

Companies are not required to send a 1099 to anyone receiving less than $600. However, as a business owner, you're still required to add that to other income on your Schedule C.

For this reason, it's up to you to track your earnings. A good practice is to use a good bookkeeping app like Hurdlr or Quickbooks Self-Employed.

It may seem different when using tax software.

If you're using tax software like H&R Block or TurboTax, it can seem quite different. They ask you for details about your 1099 forms and any additional earnings.

The software program will then add the income and enter the total on line 1 of Schedule C. None of the other information (breakdown of income, 1099 details, etc.) is added to your tax forms. Your best practice is to answer the questions asked by the software program and let it do the work for you.

For most of us, the only entry in the income section will be on Line 1.

Line 2. Returns and allowances

This accounting term usually relates to a business that sells things. In accounting, the accepted rule is once you sell something, it's income. If you have to issue a refund, you don't subtract that from income, but instead write it down as a return or allowance.

Line 3. Subtract line 2 from line 1.

In practice, a return is a negative sales item. It's money you gave back. For that reason, if you had a return in line 2, you subtract it from line 1.

Line 4. Cost of Goods Sold

Some contractors mistakenly think this is where you enter your business expenses. It is not. Cost of goods sold relates to the cost of obtaining products you sell. For instance, if you buy merchandise and flip it, this is where you would add up the total of those purchases.

Line 5. Gross Profit.

Gross profit is not the same thing as your business profit. Accounting terminology gets a little confusing. After subtracting returns and Cost of Goods Sold, gross profit is what's left. By comparison, net profit is what's left over after deducting business expenses from gross profit.

Line 6. Other income

Finance reserve income, scrap sales, bad debt, interest, state gasoline or fuel tax refunds you received or credit for biofuel claimed.

Definition of “other income” from IRS Schedule C instructions.

The most likely item that would go here for gig workers is interest earned in a business bank account. Most of these items relate to other business types. Even though most of us drive a lot, these fuel credits don't typically apply to us.

This is one area where it's good to have a tax professional guide you if you have such income.

Line 7. Gross Income

This is the final total after you adding ‘other income' to your gross profit. I expect that for more than 90% of delivery gig workers, this number will be identical to line 1.

Do gig economy companies report our earnings to the IRS?

Many people think gig work is under-the-table and tax-free. Don't make that mistake.

Before I go further: It's YOUR job to track your earnings. It is not the delivery company's responsibility.

A business is required by law to report money they paid out to individuals, even if paid to non-employees. In most situations, if a contractor has earned more than $600 with any company, that company must send the contractor a 1099-NEC form and report those earnings to the IRS.

There are a few different 1099 forms. We get into more detail about 1099 forms for independent contractors in this article.

Are tips included in the 1099 forms we get? If a customer tipped through the delivery company's app or website, that amount is included in the reported income. The IRS clearly states that tips are income and must be reported.

What if you made money that didn't get reported?

There are two typical scenarios where money isn't reported:

• Cash tips. Cash tips are rarer and rarer, but they still happen.
• If you didn't make enough to get a 1099.The reporting threshold for most 1099 forms is $600.

Do you have to report earnings if the IRS doesn't know about them? Some say you don't need to. However, the IRS states: “All cash and non-cash tips are income and are subject to Federal income taxes.”

The bottom line is that you're required to report any money your business earns. Because it isn't on a form 1099 doesn't always mean the IRS won't find out about it.

Pay attention to what often happens with many tipped employees. The IRS often tips them because they know cast tips are under-reported. Many have had to pay tip money taxes based on industry average estimates. It all comes down to patterns within an industry. Unusual patterns can trip a red flag.

Do you have to report earnings if you made less than $600 with a particular company?

A common error is a belief that we're not required to report income if we made less than $600. The IRS requires a company to report contractor payments over $600. That's not the same thing as saying our reporting is not required.

Remember that this is small business taxes we're talking about. Think of a store that has several customers. None of those customers are sending in 1099 forms, but the store still is required to report their income.

I won't tell you what to do if you made money that wasn't reported. That's an ethical decision you have to make for yourself. My purpose here isn't to advise, just to educate.

The bottom line (or the top line) is you add up all your income.

At the end of the day, there's a bit of an honor system here for reporting self-employment income.

Or is it a fear-based system? What does the IRS know? How likely are they to come after you?
This is the first part of your profit reporting: Add up the money that came into your business.

Next: you'll subtract the money that went out. If you had money left over, you had a net profit. If not, you had a net loss.

Whether you are a full-time independent contractor or this is a side hustle for you, this can be important stuff. Understanding your income and expenses is a big part of managing your tax liability.

Other articles in the Delivery Driver's tax guide series: