How do I know how much of my 1099-K is actually tips vs regular income?

Tips and regular delivery pay are actually treated the same way for tax purposes when you're an independent contractor. Both are considered self-employment income and will be taxed the same way. The 1099-K doesn't separate these amounts because the IRS doesn't require different tax treatment for them. What you should focus on instead is tracking your business expenses that can offset this income. This includes mileage (which is usually the biggest deduction), portion of phone bill, hot bags, car maintenance, etc. These deductions will reduce your taxable income significantly. You'll report all of the 1099-K income on Schedule C, then deduct your business expenses on the same form. The net profit is what you'll pay taxes on.

I was in the exact same situation last year with my food delivery gigs. After trying to manually calculate everything from weekly statements (absolute nightmare!), I found this AI tool called taxr.ai that saved me so much time. It analyzed all my delivery app statements and automatically separated my income types, tracked mileage, and identified deductible expenses. I uploaded my 1099-K and some sample weekly statements from the app, and it figured out my approximate tip-to-base-pay ratio, then applied that across my annual income. It also helped identify business expenses I hadn't considered. You can check it out at https://taxr.ai if you're drowning in calculations like I was.

So I was totally skeptical about taxr.ai (see my comment above), but I was desperate enough to try it after realizing I had over 200 separate deliveries to account for. Holy crap it actually works! The tool analyzed my statements and figured out that about 42% of my 1099-K was tips and the rest was base pay. But the real game-changer was how it handled my expenses. It found patterns in my delivery data to estimate mileage for days I forgot to track, and it identified a ton of deductions I would've missed - like the percentage of my phone bill, insurance, and even some car maintenance that counted as business expenses. Definitely recommend checking out https://taxr.ai if you're in the gig economy mess like I was.

After three hours on hold with the IRS trying to get clarification about my 1099-K situation, I finally found Claimyr. It's this service that basically calls the IRS for you and gets you connected to an actual human being without the ridiculous wait times. I was able to speak directly with an IRS agent who explained that I don't need to differentiate between tips and regular income on my tax forms as an independent contractor. Everything just goes on Schedule C. Check out https://claimyr.com if you need to actually talk to someone at the IRS without wasting your whole day. They have a video showing how it works here: https://youtu.be/_kiP6q8DX5c

OK I need to eat my words from my skeptical comment. After waiting on hold with the IRS for 3+ hours and getting disconnected TWICE, I was ready to throw my phone through a window. Decided to try Claimyr as a last resort. They actually got me connected to an IRS agent in about 37 minutes (while I just went about my day). The agent confirmed that as a gig worker I don't need to separate tips from regular pay - it all counts as self-employment income. She also helped me understand which expenses I could deduct to offset the income on my 1099-K. Worth every penny just for my sanity alone.

Former tax preparer here. One thing nobody's mentioned is that if you're trying to get a general idea of your tip ratio, you could sample a few weeks of your delivery history at different times of the year (maybe one week from each quarter). Calculate the tip percentage for those sample weeks, average them, and apply that percentage to your total 1099-K amount. It won't be perfect, but it might give you a rough idea if you're just curious about the split. Again, for tax purposes, it doesn't matter - both tips and delivery payments are treated as self-employment income.

Could someone tell me what schedule C is exactly? I'm totally new to this. Also using turbo tax and it's asking me so many questions I don't understand.

Hey Isabella! I was in the exact same boat last year with my Uber Eats and DoorDash income. The good news is you don't need to stress about separating tips from base pay - they're all treated as self-employment income on your taxes. Here's what I learned: Your entire 1099-K amount ($24,680) goes on Schedule C as gross receipts. The IRS doesn't care how much was tips versus base pay because you're an independent contractor, not an employee. What REALLY matters is tracking your business expenses to offset that income. I saved over $3,000 in taxes by properly deducting: - Mileage (this is huge - 67 cents per business mile for 2024) - Phone bill percentage used for work - Hot bags, car phone mounts, etc. - Car maintenance and repairs - Even a portion of car insurance For mileage, if you didn't track everything, try using your delivery history to estimate. Count your total deliveries and multiply by average miles per delivery (usually 3-5 miles depending on your area). TurboTax will walk you through Schedule C step by step when you select "self-employment income." Don't overthink the tip separation - focus on maximizing your legitimate business deductions instead!

Isabella, I totally get the panic about that 1099-K amount! I went through the same thing my first year doing gig work. Everyone here is right - you don't need to separate tips from base pay for tax purposes since you're an independent contractor. One thing that might help ease your mind: that $24,680 is your GROSS income, not what you'll actually pay taxes on. After you deduct business expenses on Schedule C, your taxable income will be much lower. Since you mentioned using TurboTax, here's a tip that saved me tons of time: When you get to the self-employment section, TurboTax will ask about your business expenses in plain English. It'll specifically ask about vehicle expenses, and you can choose between actual expenses or the standard mileage deduction (usually better for gig workers). Don't forget about smaller expenses that add up: insulated bags, phone chargers, even hand sanitizer you bought for deliveries. Keep receipts going forward, but for this year, try to estimate what you spent on delivery-related items. The key is being reasonable and honest about your deductions. The IRS expects gig workers to have these types of expenses, so don't be afraid to claim legitimate business costs that helped you earn that income!