Driving for Lyft is a great way to make some extra money, or even your full income. With a schedule you can tailor to fit your life, this gig is all about flexibility. Luckily, taxes as a self-employed individual can be easy too.
Understanding Quarterly Taxes for Lyft Drivers
As a Lyft driver, you are self-employed. Self-employed individuals are generally responsible for paying taxes on their income four times a year. A typical employee withholds a portion of their income for tax purposes, and the employer is responsible for another portion of their taxes. As a self-employed person, you’re responsible for both parts. Your estimated quarterly taxes will cover income tax on your earnings and self-employment tax. Self-employment tax is 15.3 percent—a combination of Social Security tax (12.4 percent) and Medicare tax (2.9 percent).
Paying quarterly taxes helps you pace throughout the year and alleviates the strain on cash flow when it’s time to file in April. Pacing is important because underpaying or failing to make on-time quarterly payments could result in a penalty for each month the return is late.
Should All Lyft Drivers File Quarterly Taxes?
The amount of money you earn driving is the real deciding factor in whether you are required by law to file quarterly taxes. If you owe more than $1,000 in taxes on your income as a driver for that tax year—after subtracting refundable credits and any income tax withholding—you are required to pay quarterly taxes.
It is worth noting, if you drive for Lyft and are also employed elsewhere—i.e. you have a full-time job and receive a W-2 at the end of the year—you could avoid the need to file quarterly by adjusting your withholding rate with your employer.