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How to file taxes with Credit Karma Tax

How to file taxes with Credit Karma Tax

Credit Karma Tax is a free filing option--all you have to do is have a Credit Karma account! You’ll get tax filing and your credit score in the same hour.

How to get started

1) Log in to your Credit Karma account, and find the “Tax” option at the top of the page

Tip: If you don’t already have a Credit Karma account, you can make one here: 

All you’ll need with you is some information about yourself (email, address, income, etc.) and your Social Security Number.

Sign up will take about a minute, and then you’ll be ready to file.

2) Have your Uber income totals ready

If you earned income through Uber in 2016, you will have received one or both of these forms: a 1099-K, and a 1099-MISC. You’ll need to have these income totals ready when you report your Uber income.

  • On your 1099-K, you’re looking for Box 1a: Gross amount of payment card/third party network transactions
  • On your 1099-MISC, you’re looking for Box 7 - Nonemployee compensation

However, if you didn’t receive a 1099-MISC, you may still have income to report! Uber only sends a 1099-MISC reporting incentive and referral income if you made at least $600, so even if you didn’t receive one, you should check your Uber Tax Summary to see if you received any of this type of income. On your Uber Tax Summary, you’ll see under the “1099-MISC Breakdown” whether you have income to report in addition to the income on your 1099-K. Find this total and have it ready.

 

3) Have your business expense totals ready

If you’ve been tracking your business expenses, then you’ll want to have all of your documentation at the ready when you go to file.

We recommend having the totals for each kind of expense ready before you file. Here’s a list of deductible business expenses for Uber drivers:

  • Mileage
  • Car cleaning
  • Passenger goodies
  • Cell phone accessories (like chargers, car holders, etc.)
  • A portion of your cell phone bill
  • A new cell phone that you bought for work
  • Dashcams
  • Background checks and vehicle inspections that were required by Uber
  • Parking costs
  • Un-reimbursed tolls
  • Paid apps that you bought for work (ex. A Spotify Premium account that you let passengers use)
  • AAA or other roadside assistance memberships
  • Car mats and seat cushions
  • Food and drink (from extra long workdays only)
  • Car loan interest

After you’ve gone through your records, you should know how much you spent on passenger goodies, how much you spent on your cell phone bill (and what percentage of of the bill was due to business), how much you spent on parking, etc.

Here’s an example of what your records should look like when you’ve finished tallying up each deduction category:

Haven’t been tracking your deductions? Don’t worry, you have a few options.

When it comes to mileage, you can start with your Uber on-trip mileage. Here’s a guide on how to take that mileage and find your total business mileage from the past year.

As for expenses: It’ll take some work, but you can still find your business deductions by going back through your records.

The absolute best form of documentation for your expenses would be receipts from the purchases. If you’ve been keeping receipts, it’s time to dig them up and tally up your deductions.

Another way to document your business expenses from the year would be to go through your bank statements, find your business purchases, and then take good notes on what was purchased, what it was used for (as well as notes on if and how the purchase was also used for personal reasons).

If you download Stride Drive, you can link your bank account and go back through your records for the past year (depending on your bank). You’ll also be able to add in detailed notes on each purchase.

How to file

1) If you received a 1099-MISC, report that you have 1099-MISC income (if you didn't receive one, you can skip to step 6)

In the “Wages & Income” section of the Credit Karma Tax software, you’ll be asked a few simple questions about the income that you received in 2016.

If you received a 1099-MISC, you’ll answer “YES” when asked if you’ve received Form 1099-MISC.

 

2) Copy over your 1099-MISC information into CKT exactly as it appears on your form

 

3) Enter the income from Box 7 of your 1099-MISC into CKT’s “Nonemployee comp” box.

 

4) Categorize your income as “Income for my business”

5) Name your business. If you drive for multiple rideshare companies, feel free to put “Rideshare driving” so that you can combine your rideshare income.

6) If you received a 1099-K from Uber as well, you’ll need to report that you have income to add to your Schedule C (the form that reports your income and expenses from your rideshare business).

If you reported that you had a 1099-MISC, then a Schedule C was automatically created for you when you reported that you had 1099-MISC income. Now you’ll need to update it with the rest of your income.

If you didn’t receive a 1099-MISC, you’ll still report that you had income from a Personal Business/Schedule C.

7) Fill in your business’s contact information

When you’re self-employed, much of your business information is the same as your personal information. This is where Credit Karma Tax comes in handy--you can auto-fill many of your personal details that are already saved in your account.

8) Classify your business

Identify your business as Transportation & Warehousing, and choose the description Taxi & limousine service. This is industry standard for rideshare driving.

9) Enter your losses, if any.

If you had a business loss from previous years of rideshare driving, you would enter in that information here.

Note: If you’d prefer to carry your loss forward and not back, you’ll have to specify your preference separately from this section. You have the option of either submitting a statement along with your tax return saying that you forego the carryback option. If you have business losses to carry forward or back, we recommend consulting a tax preparer who can advise on your case specifically.

10) Answer a few more classifying questions about your business.

These questions will be automatically filled in for you. For rideshare drivers, the following will automatically be true:

  • You did materially participate.
  • Yes, all of your investment is at risk.
  • You do not need to enter information about your inventory for your rideshare business.
  • You used the cash method of accounting.

The only question that you would need to edit is: Did you start or acquire this business in 2016?

11) Report your 1099-K income

The money that you earned in fares from Uber would be classified as “third-party network transactions,” which is why they appear on a 1099-K instead of a 1099-MISC. When CKT asks you for your earnings in “Merchant card and third party network payments,” you’ll enter your gross income from your 1099-K.

12) Deduct Uber’s commission and fees

The gross income reported on your 1099-K includes both the money you received in fares, and the commissions and fees that Uber took on each ride. This total doesn’t match what you actually received.

This means that you’ll need to deduct all of Uber’s fees as a business expense. You can find the exact amount that Uber took in commissions and fees on your Uber Tax Summary.

13) Claim your “Supplies” and “Meals and Entertainment” deductions, if you have them

Any goodies that you purchased for passengers--refreshments, hand sanitizer, tissues, etc.--would be classified as “Supplies” on your tax return.

As for food and drink that you purchased on particularly long workdays or during meetings with potential referrals--you can deduct 50% of those expenses in the “Meals and Entertainment” section.

14) Enter in your vehicle expenses

As an Uber driver, you’ll automatically have vehicle expenses to claim. At the very least, you’ll be able to claim your on-trip mileage as a deduction using the standard mileage deduction.

Fill in the appropriate details about your vehicle, and then enter in your business miles.

If you’ve been tracking your business miles on your own, enter your total in the “Business miles driven during 2016” box.

If you haven’t been tracking your mileage, there are several ways to find your total. The very least amount of mileage that you can claim can be found on your Uber Tax Summary under “On Trip Mileage.”

14) Choose your vehicle expense deduction method

The standard mileage deduction will usually give you the best deduction. However, if you are using the actual expense method and know that your deduction is higher with this method, you can elect to use it here. You may benefit more from the actual expense method if you have higher-than-normal repair costs, or if you drive a gas guzzler.

Note: If you’ve used the actual expense method in the past, you’ve got to stick with it! The actual expense method allows you to write off your car’s depreciation, so if you switch to the standard mileage rate, you’ll be “double-deducting” your depreciation.

15) Your car was likely available for personal use outside of business hours, in which you would answer these vehicle questions according to the picture below. However, feel free to change your answers when appropriate.

Since you’ll at the very least have your Uber trip logs, you should definitely state that you have written proof.

16) Enter in your “Other expenses”

Deductible expenses that would go in this category include:

  • Car cleaning
  • Tolls
  • Parking
  • A portion of your cell phone bill
  • Phone accessories
  • Inspections/background checks
  • Roadside assistance memberships
  • Car mats and seat cushions

17) Enter in any depreciating assets you may have

If you purchased an item that has a useful life of more than 1 year, then you’ll need to depreciate it as a business asset.

These assets may include a new cell phone purchased specifically for rideshare driving, or a dashcam to be used when you’re on-duty.

Enter the following details:

  1. Asset description (what you bought)
  2. Asset classification: How long you would typically use an asset determines its classification, or how long you can depreciate the cost over time. A cell phone or dashcam would have the shortest classification of “3 Year Property.”
  3.  Date placed in service (when you started using the asset for work)
  4. Cost of asset
  5. Percentage of business use: Especially for items like cell phones that are often used outside of work, you’ll need to declare about what percentage of the time you’re using the asset for work. Keep in mind that making even the occasional phone call to a friend while on duty is considered “personal use”--and it’s pretty easy for the IRS to find personal calls in your phone records during an audit. Play it safe, and put in an honest percentage of time. You can take a look at a typical week’s or month’s phone records to find about what percentage of your usage is attributed to work.
  6. Section 179 deduction: This is optional, but could be pretty beneficial to you. If you use this asset for work over 50% of the time, then you can elect to deduct the full purchase price from your income. Otherwise, you would depreciate the asset over multiple years.

One note: If you do decide to take the 179 deduction, you would only deduct the cost relative to your percentage of business use. This means that if you bought a phone for $500 and use it 60% of the time, you’d only deduct $300 of that with the 179 deduction.

18) Clarify a few more details about the asset

For items like cell phones and dashcams, you can leave this page unedited:

What is self-employment tax and how do I calculate it?

What is self-employment tax and how do I calculate it?

What to do if you weren’t tracking your mileage

What to do if you weren’t tracking your mileage