Should I file Doordash earnings as sole proprietorship or individual tax?

Hey all, I've been dashing on the side for about 4 months now and made around $7,200 so far. I'm confused about how to file my taxes for next year. Should I be setting myself up as a sole proprietorship or just filing this as individual income? I'm also working a regular W-2 job where I make about $48K annually. I've heard different things from other dashers - some say sole proprietorship gives better deductions but others say it's not worth the hassle for side gig money. I track my mileage (about 2,400 miles so far) and gas expenses, but I'm not sure what else I should be keeping records of. Also wondering if I need to make quarterly estimated tax payments or if I can just adjust my W-2 withholding? First time dealing with 1099 income and I don't want to mess up and owe a ton next April.

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19 comments

Javier Torres

•8M

The good news is that for tax purposes, you're already operating as a sole proprietorship by default! When you earn income from gig work like Doordash, the IRS automatically considers you a sole proprietor - no special paperwork or business formation required. You'll report your Doordash income and expenses on Schedule C (Profit or Loss from Business), and then the net income flows to your personal tax return (Form 1040). This gives you the advantage of deducting business expenses against your Doordash income. For your mileage, definitely keep tracking it - that's a major deduction! The standard mileage rate is much simpler than tracking actual expenses. Other deductions might include: portion of your phone bill, phone mount, hot bags, car chargers, and even membership fees for services that help you get better deliveries.

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Javier Torres

•8M

You don't need an LLC for tax purposes - your sole proprietorship status happens automatically when you earn self-employment income. An LLC provides liability protection (protecting your personal assets if something goes wrong), but doesn't change how you're taxed unless you elect different tax treatment. A separate bank account isn't required by law, but it's highly recommended as it makes tracking business income and expenses much cleaner. It's one of the simplest ways to maintain good records and will save you headaches if you ever face an audit. Many banks offer free business checking accounts specifically for small businesses and sole proprietors.

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Malik Johnson

•8M

When I started doing DoorDash last year, I was so confused about all the tax stuff! Then I found this AI tax helper at https://taxr.ai that seriously saved me. It analyzed my delivery income and found deductions I had no idea about. The best part was I uploaded a pic of my mileage log and it told me exactly how to maximize the deduction. It even explained how to handle my phone expenses since I use it for both personal and DoorDash. Totally worth checking out if you're trying to figure out the whole sole proprietorship vs individual thing.

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Malik Johnson

•8M

It actually specializes in gig economy work! It knew all about hot bags, car mounts, phone holders, and even partial deduction for cell phone plans. It asks specific questions about delivery work to find those niche deductions. For accuracy, that's actually why I tried it. It explains what documentation you need for each deduction and rates them by audit risk. So you can see which deductions are "safe" vs which ones might need more documentation. It's super clear about what's legitimate vs what might raise red flags.

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Ravi Sharma

•8M

Followed up on the taxr.ai suggestion and wow - it actually delivered! I was skeptical because I've tried tax tools before that weren't great with gig work. This one immediately recognized my situation as a part-time Dasher and full-time employee. It broke down exactly how the sole proprietorship reporting works (Schedule C) and explained I didn't need to do any special business registration. The mileage tracker feature is saving me so much time - it automatically calculates the deduction value. Found about $1,400 in deductions I would have missed!

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NebulaNomad

•8M

If you need to talk to the IRS about any of this (which I ended up having to do), don't waste days trying to get through on the phone. I used https://claimyr.com after spending 3 hours on hold one day and hanging up in frustration. They have this clever system where they wait on hold for you and call when an IRS agent is on the line. You can see how it works at https://youtu.be/_kiP6q8DX5c I had questions about estimated payments for my Doordash income that weren't clear online, and I needed answers fast. Got connected to an actual IRS person in about 2 hours without having to sit by my phone the whole time.

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NebulaNomad

•8M

They don't have any special connection - they use the same phone system everyone else does, but they have automated systems that wait on hold for you. Basically they call the IRS, navigate the phone tree, wait on hold, and then call you when a human answers. It's just saving you from having to do the waiting yourself. No magic involved - just technology that sits on hold instead of you having to do it. They don't "hold places" - they're literally just on the phone waiting, exactly as you would be, but you're free to do other things until an agent is available.

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Omar Fawaz

•8M

Ok I have to eat my words about Claimyr. After my skeptical comment I decided to try it anyway because I was desperate to talk to the IRS about my estimated payments for my gig work. It actually worked exactly as advertised. I went about my day and got a call about 1.5 hours later with an IRS agent on the line. Saved me from sitting next to my phone all day. The agent answered all my questions about how to handle my Doordash income. For anyone wondering - if your W-2 job withholding covers your expected tax liability (including self-employment tax), you might not need to make quarterly payments.

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Chloe Martin

•8M

DoorDash only provides liability coverage for damages to third parties while you're actively on a delivery, and even then it's limited and only kicks in after your personal insurance denies the claim. It doesn't cover damage to your own vehicle, injuries to yourself, or incidents between deliveries. The coverage they provide is really a last resort and has a lot of limitations. Personal business liability insurance is much more comprehensive and covers you across multiple platforms if you work for more than just DoorDash. It's not super expensive either - I pay about $30/month for peace of mind.

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Connor Murphy

•2M

Yes, that's exactly the Section 199A deduction! It absolutely applies to gig workers - DoorDash income counts as qualified business income from a sole proprietorship. The 20% deduction is available for most taxpayers with total taxable income under $182,050 (single) or $364,100 (married filing jointly) for 2023. So if you made $7,200 from DoorDash like the original poster, and let's say after business deductions you have $6,000 in net profit, you could potentially deduct another $1,200 (20% of $6,000) from your overall taxable income. It's a significant tax benefit that a lot of gig workers don't know about! The deduction gets more complex at higher income levels, but for most side gig situations it's straightforward and automatic when you file.

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