Taxes for gig workers and independent contractors

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. For tax purposes, that usually means your 1099 income is business income from self-employment: you keep records, report profit or loss on Schedule C, and plan for self-employment tax and income tax. That is a lot to run alone — exactly the problem Withholden is built to solve with bookkeeping, tax savings, and estimated-payment support.

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 tax forms you may receive:

• Form 1099-NEC — reports nonemployee compensation a platform paid you directly. Starting with tax year 2026 the reporting threshold is $2,000 for the year (it was $600 for earlier years).
• Form 1099-MISC — reports various types of income, including some payments from platforms that don't use 1099-NEC.
• Form 1099-K — reports payments processed through a payment app or card network. Under current law a platform only has to issue one if you received more than $20,000 and had more than 200 transactions in the year, so most drivers will not get one. 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, meaning that you haven't paid enough to meet your tax obligations and the IRS charges you a fee. Think of a late fee. 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 keeps your bookkeeping and tax-prep workflow moving throughout the year so each deadline is easier to handle.

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 planning 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