DoorDash delivery drivers can face several repercussions if they don’t pay taxes on time, affecting their financial situation. As DoorDash drivers are considered self-employed individuals, they owe a certain amount of taxes throughout the year. Therefore, missing these payments can result in heavy fines with interest. At the same time, an IRS audit can be further stressful. Here’s everything you need to know if you don’t pay DoorDash taxes.
What Happens If I Don’t Pay Taxes On My DoorDash Earnings?
You can no longer get rid of the fees
If you fail to pay your DoorDash taxes, one immediate consequence is that you can no longer deduct work-related expenses. As an independent contractor, you can usually claim business-related costs like gas, phone, health insurance, and equipment.
Taxpayers who do not submit their returns may find that the Internal Revenue Service (IRS) uses an estimate of their tax liability rather than their actual tax situation, rendering them unable to lower their taxable income.
You risk losing your financial stability and security if you don’t pay taxes. Living in continuous fear of fines, legal action, and financial consequences can be anxiety-inducing. You must resolve tax matters without delay to protect yourself from economic harm.
Cannot get a loan
The inability to get loans or credit is another consequence of ignoring your tax responsibilities. Financial records, including tax compliance, are frequently examined by lenders.
You may find it difficult to obtain loans or credit cards for personal and professional use if your credit is affected by being listed as someone who owes taxes.
You have to pay a penalty for not filing
Late tax returns are subject to fines levied by the Internal Revenue Service. Over time, these penalties might increase and make your debt much larger.
The financial burden could worsen if interest charges are added to the errant tax obligation. Penalties will get worse the longer you put off paying your taxes, which can severely dent your budget. If taxpayers continue to avoid paying their fair share of taxes, the government may take legal action. Liens on your property, wage garnishment, or asset seizure are all examples of what might happen.
Those who owe a lot of taxes can end up in jail, be fined, or have to suffer both. If the taxpayer’s unpaid obligations reach a specific threshold, the IRS can freeze their bank accounts and cancel their passports.
What Taxes Do DoorDash Drivers Need to Pay?
Your profits as an independent contractor with DoorDash are subject to various taxes.
If you want to stay compliant and avoid penalties, you need to know your tax responsibilities, whether they are for income or self-employment. Detailed below is a list of all the taxes that DoorDash drivers must pay:
Income Tax
Even though you can get DoorDash cash advance, it’s important to include all the money you made from deliveries in your yearly tax return. All the money coming in from deliveries and any extra money you get from bonuses, tips, or incentives goes into this total. This ensures you pay the correct amount of taxes and avoid any penalties.
Self-Employment Tax
Unlike regular employees, independent contractors must pay the self-employment tax, including the employer and employee parts of Social Security and Medicare. Twelve percent goes towards Social Security and two-and-a-half percent towards Medicare, a total of 15% on self-employment taxes.
Taxes at the state level
Your ability to deduct DoorDash income from your taxable income will depend on your residence and place of employment. Knowing your state’s tax laws and regulations is crucial, as they differ from one another.
Taxes at the municipality level
People who work for themselves, such as delivery drivers, may be subject to additional taxes levied by certain towns and cities. Verify if you are liable for municipal taxes, which may be based on sales, income, or company licensing.
Does DoorDash Report Earnings to the IRS?
Yes, For drivers with $600 or more in non-employee income for the tax year, DoorDash discloses profits to the IRS. The IRS and the driver are provided with Form 1099-NEC for this reporting. The IRS uses this data to verify that people declare their income correctly and pay their fair share of taxes.
What Should I Do if I Can’t Afford to Pay My DoorDash Taxes?
If you are having trouble paying your taxes, there are measures you can take strategically to make it easier. Consider alternatives, including payment plans, compromise offers, and time extension to pay.
Consulting a tax expert from Beem will provide a strategy, easing your way through the maze and leading you to a workable resolution for your financial predicament. Here are a few of the steps you can take to settle your tax debt if you can’t pay in full:
Payment Plans
You can pay your tax bill in manageable monthly installments through one of the payment plans of the IRS. The Internal Revenue Service accepts payment plan applications submitted either online or by mail.
Offer in Compromise
If you are eligible, you can settle your tax liability for a reduced amount through a compromise offer. You may qualify for a tax refund if you cannot pay your tax bill in full due to extraordinary circumstances or financial hardship.
Extension of Time to Pay
If you require more time to pay your taxes, you can submit a request to the IRS. You can avoid extra penalties by paying your tax bill within the 120-day grace period.
Get Expert Advice
Talk to a tax expert or a financial advisor from Beem who can explain your choices and help you figure out how to reduce your tax burden. Beem is well-versed in the intricacies of tax law and will help you with recommendations.
Conclusion
In conclusion, there are repercussions beyond monetary fines for not paying taxes on your DoorDash earnings. Neglecting your tax responsibilities can have far-reaching consequences that affect your financial situation and quality of life, including the inability to deduct business expenses and possible legal action from tax authorities.
DoorDash drivers must make tax compliance a top priority and act swiftly to resolve any concerns that may arise. Risks can be reduced and long-term financial security can be assured by drivers who seek help from Beem. Stay up-to-date on tax rules with Beem and avail the maximum refund on your taxes.
