Taxes for gig workers

You're self-employed (in the eyes of the IRS)

When you drive for Uber, Lyft, DoorDash, Instacart, or similar platforms, you are generally an independent contractor, not an employee. No taxes are withheld from your payouts, so it's your responsibility to set money aside and pay the IRS yourself. That's exactly the problem Withholden is built to solve.

All of your gig income is taxable — even cash, even side work, and even if you never receive a tax form for it. The IRS explains this in its Gig Economy Tax Center.

The forms you may receive

• Form 1099-NEC — reports nonemployee compensation a platform paid you directly (often $600 or more in a year).
• Form 1099-K — reports payments processed through a payment app or card network. The reporting threshold has been changing in recent years, so you may receive one for smaller amounts. Check the current threshold on the IRS 1099-K page.

Not receiving a form does not mean the income is tax-free — you still must report it.

Two taxes to plan for

1. Self-employment (SE) tax

This covers Social Security and Medicare — the portion an employer would normally split with you. SE tax is 15.3% of your net self-employment earnings (12.4% Social Security + 2.9% Medicare). You generally owe it once your net earnings reach $400 for the year. You can deduct half of your SE tax when figuring your income tax. See IRS Self-Employment Tax.

2. Federal (and state) income tax

On top of SE tax, your net profit is added to your taxable income and taxed at your regular bracket. Most states tax it too. This is why a flat “set aside 25–30%” rule of thumb is common — it tries to cover both taxes at once.

Pay as you go: quarterly estimated taxes

Because no one withholds for you, the IRS expects you to pay estimated taxes four times a year using Form 1040-ES. Missing these can trigger an underpayment penalty. The typical due dates are:

• Q1 — around April 15 (Jan–Mar income)
• Q2 — around June 15 (Apr–May income)
• Q3 — around September 15 (Jun–Aug income)
• Q4 — around January 15 of the next year (Sep–Dec income)

Withholden helps you save throughout the year so the cash is ready when each deadline arrives.

Lower your bill: track deductible expenses

You're taxed on your net profit — income minus legitimate business expenses — reported on Schedule C. Common deductions for drivers include:

• Vehicle costs — either the IRS standard mileage rate (which changes each year) or your actual car expenses. Keep a mileage log.
• Phone and data plan (business-use portion)
• Tolls and parking incurred while working
• Hot bags, phone mounts, supplies, and platform fees
• Health insurance premiums (if you qualify)

See Deducting Business Expenses and the IRS's car expense rules (Topic 510).

Keep good records

Save your platform earnings summaries, 1099s, mileage logs, and expense receipts. Good records make filing faster, support your deductions if you're ever questioned, and help you set an accurate withholding percentage. The IRS covers this in Recordkeeping for the self-employed.

Helpful IRS resources

• Gig Economy Tax Center
• Self-Employed Individuals Tax Center
• Make a payment to the IRS
• Publication 505 — Tax Withholding and Estimated Tax