Are you looking for a part-time or full-time job that pays you a good price while allowing you to work at flexible times? Instacart is the best place for side hustlers and students looking to make some extra cash during their free time. But that income isn’t tax-free. If you have had self-employment jobs or a small business previously, you know how the money earned from Instacart is taxable. 

Whether you pay estimated taxes quarterly or a lump sum at the end of the year, the IRS expects you to fill out the Instacart 1099 form and clear your dues before April 15th. Remember that if your tax dues exceed $1,000 due to late payments or underpayments, you will incur a late payment penalty. In this post, we will clear all your doubts about Instacart taxes, how they are paid, and how much you owe.

In-store Vs. Full-service Shoppers

You can be an in-store shopper with a full-time and regular job at Instacart or a full-service shopper working part-time. If you have a regular job, you will be treated like normal employees working a 9-5 job. These people have nothing to worry about taxes, as Instacart will take care of that. Like other employers in America, Instacart will keep a portion of your income aside for tax in the form of withholding. They will issue a W-2 form showing you the total amount you owe in taxes and how much is withheld from your paychecks for income tax every quarter.

Now, Instacart also allows you to work at the store and be a driver at the same time. If you are working multiple jobs, including a part-time delivery, you are going to have to do your taxes manually. That’s because full-service shoppers are not considered Instacart employees. Their income is never fixed. Instead, they are treated as independent contractors who need to fill out the 1099 forms issued by Instacart and pay their taxes to the IRS. In addition to the income tax paid annually, these people have to pay self-employment tax, calculated from their annual income from Instacart delivery projects.

How Much Do You Keep Aside for Instacart Taxes?

Independent contractors driving for Instacart must pay Social Security and Medicare taxes. The IRS set forth a 15.3% tax rate for regular employees, split equally between employees and employers. Instacart drivers, however, are regarded as self-employed and are supposed to pay 7.65% twice (the portion of the employer and the employee). The worst part is that this is paid in addition to your income and federal taxes.

A 15.3% tax rate can make it challenging for Instacart drivers to pay taxes. No wonder people with a job at Instacart prepare for the tax season months before it arrives. The last thing they want is underpayment penalties in addition to the hefty tax bills. You can use the self-employment tax calculator to get a clear picture of the taxes owed on your income. Know that there are certain write-offs you can claim to lower your tax bills, one of which is the 50% deduction on your taxable income, which reduces it to half. Since you don’t have an employer paying half your tax bill, the IRS has relieved your tax burden by 7.65%, meaning you have to pay half the amount you owe.

What Forms Do You Need to File?

Getting an idea of how much you have to pay is the first step to paying your Instacart taxes, but your tax filing process starts with filling out the required forms. You need 1099-NEC from Instacart to show your total earnings from the platform over the course of a year. They might email it to each full-service shopper or hand it manually before 31st January. 

They will send a copy of this form to the IRS so that they can know your total earnings. 1099-NEC is the replacement of 1099-MISC. Reach out to Instacart support if you don’t get the form 1099 by February. One reason why you didn’t receive the form is that you made less than $600 on the app. Check the Instacart app or bank statement for the calendar year to know how much you made and whether you are eligible to file your income taxes.

Deductions You are Allowed to Take on Instacart Taxes

Fortunately, your entire income from Instacart is not taxable. You need to pay taxes on your net income, which can be achieved after deducting your business expenses from your gross income. You can take a standard deduction or itemize them if you have all the receipts from past transactions. Use the self-employment tax calculator tool to know which expenses you can deduct from your income. Or, work with a tax accountant to streamline your calculation process.

Also Read - Steps for Preparing Yourself for the Tax Season in Advance