If you work a job as an employee, then the company will automatically withhold from your paycheck the taxes that you owe the government. This begs the question, does Doordash take out taxes for its drivers?
No, Doordash does not take out taxes for its drivers as the drivers are independent contractors. Doordash drivers must calculate their own taxes and pay them to the government themselves.
The rest of this article will explain the implications of working as an independent contractor for Doordash.
Doordash Doesn’t Take Out Taxes – What This Means for You
Doordash not taking out taxes makes filing a tax return a little more confusing. Here are some of the things to keep in mind when working as an independent contractor (ie. for Doordash) rather than a W-2 employee.
- You must save some money to pay your taxes as nothing is withheld.
- When working a W-2 job, your company will withhold some money so you can pay your taxes at tax time. With Doordash you must save some money in order to cover your tax liability at the end of the year.
- You can write off expenses.
- You’re considered a business owner by the IRS when you drive for Doordash. This means you can write off a wide range of expenses and greatly lower your tax liability in the process.
It’s a little confusing the first time you do it. It does get a lot easier once you understand the process and how to properly itemize your expenses.
How Much Tax Do Doordash Drivers Pay?
The amount of taxes that a Doordash driver pays depends on two factors:
- How much money they earn.
- This includes any income outside of Doordash.
- The amount of deductions they claim on their taxes.
Most Doordash drivers can write off about half their Doordash earnings due to the deductions available. This means they pay 15.3% for self-employment tax and federal income taxes corresponding to their tax bracket on about half their earnings.
What Deductions Are Available for Doordash Drivers?
Doordash drivers have a range of deductions available. This is important as deductions reduce profit (taxable), so drivers that claim more deductions will pay less in taxes. Some deductions available to Doordash include the following:
- Mileage deduction
- 58.5 cents per mile driven in 2021. 62 cents per mile driven in 2022.
- This includes gas, insurance, and maintenance. It’s almost always better to deduct miles rather than itemizing expenses for gas, insurance, and maintenance.
- General Business Expenses
- This includes stuff like hot bags, car phone chargers, phone mounts, tolls, uniforms, parking, and part of your cellphone bill.
It’s best to hire a tax professional to ensure you properly deduct your expenses. They will also point out any deductions you are eligible for and may have forgotten.
Doordash does not tax out taxes when paying their drivers. It is the responsibility of the driver to pay their taxes during tax time. This means you should save some of the money you earn while driving for Doordash to pay your tax liability.
You do not want to find yourself in the situation where you owe taxes and have no money to pay the amount owed. Fortunately, the IRS offers plenty of deductions for self-employed individuals, so you will likely not owe that much in taxes.