TAMPA, Fla. (WFLA) – For many who lost jobs during the pandemic, independent contract work became a lifeline to help pay bills.
But for many new to independent contractor work, they’re now getting a big tax surprise – when they receive a 1099 tax form for tens of thousands of dollars more than they actually collected.
That’s what happened to Dwain Lorditch, who worked for Lyft last year. He was stunned to receive a 1099-K form that showed his earnings of $71,954.03, when his records show he only made $38,400.
“I can’t see paying the taxes on that when I didn’t make it,” he said.
He’s not the only one receiving this troubling 1099-K shockers. But here’s the good news, while it’s a scary surprise at first, it’s not what it seems.
Third-party payment processor companies like Lyft and Uber are required to report all of the income you generated and issue you a 1099-K if you made over $20,000 and did at least 200 transactions.
Here’s what you need to understand: the gross amount includes taxes and fees the company charged your passengers. In the end, this should not affect the amount you pay in taxes – as long as you deduct all of those fees and commissions.
But you need to make sure you remember to make those deductions or you will pay taxes on money you didn’t collect.
First, you need to figure out what those fees are. Lyft has a breakdown of your account on its website. You’ll just need to report each of the fees to your tax preparer.