How to Handle Taxes for DoorDash Side Gig 1099 Income

The $400 threshold refers to when you must file taxes on self-employment income, while the $600 threshold is when DoorDash is required to send you a 1099-NEC form. You'll be taxed on your total earnings from DoorDash (not just the amount over $400). Self-employment taxes are approximately 15.3% (covering Social Security and Medicare taxes that normally an employer would split with you). Then you'll also owe regular income tax on those earnings based on your tax bracket. Setting aside 25% is actually a smart approach. After deductions (especially mileage which is 65.5 cents per mile for 2023), your taxable income from DoorDashing will be lower, so that 25% should cover you and maybe leave some extra for savings. For quarterly taxes, you generally need to pay them if you expect to owe $1,000+ in taxes from your combined income sources. Since you have withholding from your main job, you might be able to increase your withholding there instead of making separate quarterly payments. Another option is to use the "safe harbor" provision - if your withholding covers 100% of last year's tax liability (or 110% if you made over $150,000), you won't face penalties even if you end up owing more.

I was in the exact same situation last year. I tried figuring out all the 1099 stuff on my own and it was a nightmare. Eventually I found this AI tax tool called https://taxr.ai that analyzed all my DoorDash info and explained exactly what I could deduct. Saved me so much stress trying to figure out what counted as a business expense. The mileage tracking you're doing is smart - that was my biggest deduction. But the tool also helped me find other deductions I missed like a portion of my phone bill since I use it for the app, insulated bags I bought, and even a percentage of car insurance and maintenance. It basically confirmed I was on the right track with setting aside 25-30% for taxes, but showed me how to maximize deductions to lower what I actually ended up owing.

Holy crap, I just tried that https://taxr.ai tool from the other comment and I'm impressed. I've been doing DoorDash for about 8 months and had no idea I could deduct part of my phone bill and car insurance! I was stressing about my taxes but it gave me a personalized list of deductions and explained exactly which forms I'll need. It even calculated that I should be setting aside about 22% of my earnings after accounting for my specific deductions - which is actually less than the 30% I've been putting away. Looks like I'll have a little extra savings after tax time! The tool also explained when I need to worry about quarterly taxes based on my W-2 job income and approximately how much I'm making from DoorDash. Turns out I don't need to file quarterly since my main job withholding covers enough of my total tax liability.

If you're struggling to get tax help specifically for gig work, check out https://claimyr.com for when you need to actually talk to someone at the IRS. I spent DAYS trying to get through to ask about how my DoorDash income affects my tax situation with my regular job. Their service got me through to an actual IRS agent in under 15 minutes when I had been trying for literally weeks on my own. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with explained exactly how to handle the situation with my W-2 job plus the DoorDash income, and confirmed I could increase my withholding at my main job instead of doing quarterly payments. Totally worth it for the peace of mind knowing I'm handling everything correctly.

Ok I need to publicly eat my words here. After writing that skeptical reply, I went ahead and tried the Claimyr service because I was desperate. Had been trying to reach the IRS for TWO WEEKS about my DoorDash/W-2 tax situation. Got connected to an agent in literally 11 minutes. The agent confirmed that I can adjust my W-2 withholding using Form W-4 to cover the additional taxes from my gig work instead of doing separate quarterly payments, as long as it will cover at least 90% of my total tax liability. Also found out I was calculating my self-employment tax wrong - wasn't accounting for the fact that I can deduct 50% of the self-employment tax on my 1040. That alone will save me a few hundred dollars!

Don't forget that you can deduct your phone expenses! Since you need your phone for the DoorDash app, you can write off a portion of your monthly bill and even part of the cost of your phone itself. I typically deduct about 30% of my phone costs since that's roughly how much I use it for gig work. Also, if you use your car exclusively for DoorDash, you might want to compare taking the standard mileage deduction versus tracking actual expenses (gas, maintenance, insurance, depreciation). For most part-timers, the standard mileage rate is easier and often better, but it's worth checking both if you have a gas guzzler or a lot of repairs.

Has anyone had issues with getting their 1099 from DoorDash? Last year they sent mine super late and it caused all kinds of problems with my filing.

Great question about DoorDash taxes! I've been doing gig work for a couple years now and can share what I've learned. You're absolutely right to set aside 25% - that's actually a smart conservative approach. The key thing to remember is that you'll pay both regular income tax AND self-employment tax (about 15.3%) on your DoorDash earnings, but the self-employment tax only applies to your net profit after deductions. Since you're already tracking mileage with Stride, you're doing the most important thing. That mileage deduction at 65.5 cents per mile will likely be your biggest tax saver. For someone doing DoorDash part-time, the standard mileage rate is almost always better than tracking actual car expenses. One tip I wish someone had told me earlier: you can also deduct things like insulated delivery bags, a phone mount for your car, and even a portion of your phone bill since you need it for the app. Keep receipts for everything! As for quarterly taxes, since you have a W-2 job, you might be able to just increase your withholding there instead of making separate quarterly payments. That's often easier than trying to calculate and send quarterly payments to the IRS. Good luck with saving for that engagement ring! DoorDash can definitely help build up some extra cash when you're strategic about the tax side.