Instacart Tax Filing Guide: Everything You Need to Know

This article provides a comprehensive guide on how to file taxes as an Instacart shopper or delivery driver. It covers everything from understanding the types of income you earn, deductions you may be eligible for, and how to accurately report your earnings to ensure you meet your tax obligations.

If you’re an Instacart shopper or delivery driver, filing taxes can seem daunting, especially if this is your first year working as an independent contractor. Unlike traditional employees who receive a W-2 form, Instacart shoppers are considered self-employed, meaning you’re responsible for tracking your income, expenses, and paying self-employment taxes. In this Instacart Tax Filing Guide, we’ll walk you through the essential steps to ensure you file your taxes correctly, maximize your deductions, and avoid common mistakes that could lead to audits or penalties.

Understanding Your Income as an Instacart Shopper

Instacart shoppers are typically paid for completing grocery shopping and delivery orders. Your income as an Instacart driver falls into two main categories:

  • Earnings from Instacart: This includes the base pay for each order, tips, and bonuses.
  • Tips and Bonuses: Tips from customers are considered part of your income, and any bonuses provided by Instacart (such as peak pay during high-demand hours) are also taxable.

Instacart will issue a 1099-NEC form if you earned over $600 in a tax year. This form reports the total income you received as an independent contractor. If you earned less than $600, Instacart isn’t required to send you a 1099-NEC, but you’re still required to report all your income to the IRS.

What to Do If You Didn’t Receive a 1099-NEC

What to Do If You Didn’t Receive a 1099-NEC?

Even if you don’t receive a 1099-NEC, you are still responsible for reporting all your income. The IRS expects you to report the full amount you earned, including any tips you received in cash or electronically. Keep track of all your income by saving pay stubs, payment records, or any other receipts Instacart provides.

Deductible Expenses for Instacart Shoppers

One of the key benefits of being an independent contractor is that you can deduct eligible business expenses to reduce your taxable income. As an Instacart shopper, many of your work-related expenses can be written off. Here are some common deductible expenses:

a. Vehicle Expenses

Since Instacart requires you to drive to pick up and deliver groceries, your vehicle expenses are likely your largest deduction. You can deduct either the standard mileage rate or your actual vehicle expenses, whichever results in a higher deduction. For the 2024 tax year, the standard mileage rate is 65.5 cents per mile.

If you choose to deduct actual expenses, you can include:

  • Gas
  • Maintenance and repairs
  • Insurance
  • Depreciation
  • Vehicle registration

Make sure to track your miles for work-related trips, as the IRS requires documentation. A mileage tracking app or a simple logbook can be a huge help.

b. Phone and Communication Costs

Instacart shoppers rely heavily on their smartphones to receive orders, communicate with customers, and navigate to delivery locations. You can deduct a portion of your phone bill and any other communication-related expenses. If you use your phone exclusively for work, you can deduct the entire cost. Otherwise, you’ll need to calculate the percentage of your phone usage that is work-related and apply that percentage to your phone bill.

c. Supplies and Equipment

You can also deduct the cost of any supplies you use for work, including:

  • Coolers or bags to keep groceries fresh
  • Phone chargers and holders
  • Insulated delivery bags
  • Other work-related tools or supplies

d. Health Insurance

If you’re self-employed and pay for your own health insurance, you can deduct the premiums as a self-employed health insurance deduction. This includes premiums for medical, dental, and long-term care insurance, as long as you’re not eligible for an employer-sponsored plan.

e. Other Business Expenses

You may also qualify for deductions on other business-related costs, such as:

  • Marketing or advertising (if you promote your services online)
  • Accounting and bookkeeping services
  • Business licenses or permits
  • Parking fees or tolls
How to File Taxes as an Instacart Shopper

How to File Taxes as an Instacart Shopper?

As an independent contractor, you’ll file your taxes differently than traditional employees. Here’s what you’ll need to do:

Step 1: Gather Your Tax Documents

First, make sure you have all the necessary documents:

  • 1099-NEC form from Instacart (if you earned over $600)
  • Record of any additional income (such as tips)
  • Receipts for deductible expenses (vehicle expenses, phone bills, etc.)

Step 2: Complete Schedule C

As an independent contractor, you’ll need to report your earnings on Schedule C (Profit or Loss from Business). This form allows you to list your income and deduct your business expenses.

  • Income Section: Report all income from Instacart and any other sources.
  • Expense Section: List your deductible expenses, such as mileage, phone expenses, and supplies.

Step 3: Self-Employment Tax

Since Instacart shoppers are self-employed, you’ll be subject to self-employment (SE) tax, which includes Social Security and Medicare taxes. The SE tax rate is 15.3% on your net earnings (after deducting expenses). This is in addition to your regular income tax.

You’ll calculate your self-employment tax using Schedule SE and include it when filing your tax return.

Step 4: Pay Estimated Taxes (Quarterly)

As a self-employed individual, you’re required to pay quarterly estimated taxes if you expect to owe at least $1,000 in taxes. Estimated tax payments cover both your income tax and self-employment tax.

If you haven’t been making quarterly payments, you could face penalties and interest on the amount you owe. It’s best to start making these payments in the coming year if you haven’t already.

How to Maximize Your Deductions

How to Maximize Your Deductions?

Maximizing your deductions is one of the best ways to lower your taxable income as an Instacart shopper. Here are some tips to ensure you take full advantage of available deductions:

  • Track Everything: Keep a log of your mileage, expenses, and any other work-related costs. Use apps or spreadsheets to organize your records.
  • Use Tax Software: Tax software can help you navigate the deductions you qualify for and ensure that you’re not missing out on potential savings.
  • Hire a Tax Professional: If you’re unsure about your deductions or want to make sure you’re filing correctly, consider hiring a tax professional who has experience working with independent contractors.

Common Mistakes to Avoid

When filing taxes as an Instacart shopper, there are several common mistakes that could lead to penalties or missed deductions. Avoid these pitfalls:

  • Not Reporting All Income: Even if you didn’t receive a 1099-NEC, you must report all income, including tips and bonuses.
  • Forgetting to Track Mileage: Mileage deductions can be substantial, so make sure to track your miles carefully.
  • Neglecting to Pay Self-Employment Tax: If you’re self-employed, failing to pay your SE tax can lead to penalties. Be sure to calculate and pay this tax.
FAQs Instacart filers

FAQs:

Do I have to pay taxes if I earn less than $600 with Instacart?
Yes, you are required to report all your income to the IRS, even if you earned less than $600. Instacart may not issue a 1099-NEC, but you are still responsible for paying taxes.

What can I deduct as an Instacart shopper?
Common deductions include mileage, phone expenses, vehicle costs, and supplies like insulated bags or coolers used for deliveries.

How do I calculate my self-employment tax as an Instacart shopper?
Self-employment tax is 15.3% of your net earnings (income minus deductions). You calculate it using Schedule SE.

Can I claim my car as a deduction for Instacart work?
Yes, you can deduct either the standard mileage rate or your actual vehicle expenses if you use your car for Instacart deliveries. Keep detailed records of your mileage.

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