But before you take the plunge into a ride-sharing career, here are some things you need to know about driving for Uber or Lyft, as told by those who have done the job. Working for a ride-sharing company can be one of the best ways to earn extra cash, but you’ll quickly realize it’s not always as easy -- or as lucrative -- as it seems.
1. You’re responsible for paying the tax on your income.
When you drive for Uber or Lyft, you’re considered an independent contractor, not an employee. That means income tax isn’t taken out of your paycheck -- you need to pay it on your own.
For example, let’s say you made $40,000 a year in fares. After Uber’s cut, you’d take home about $32,000. Then, you need to pay the tax on that income, and that amount depends on a variety of personal factors. Ultimately, your Uber driver pay will be a lot less than what you earn in fares.
Janessa, who started driving for Uber for the flexible schedule, got tripped up by her new tax situation the first year she filed. “The first year I did my taxes with Uber, I was so lost,” she said. “I hadn’t been keeping track of all my miles, and since there isn’t a tax deduction, it was a bit stressful.”
Luckily, there is relief for Uber and Lyft drivers who need some extra guidance. Most tax experts and certified public accountants are familiar with the industry by now and can help you plan ahead for taxes on your Uber driver pay. Otherwise, you could end up with a hefty tax bill.
You can also use free online tools to calculate your estimated tax payments. Popular DIY tax software, such as TurboTax or H&R Block, can also help ride-share drivers avoid making common mistakes on their taxes.
2. Your expenses can help lower your tax bill.
Although the tax implications when you drive with Lyft or Uber put a dent in your earnings, you can recoup some of that money.
As an independent contractor, the IRS considers you self-employed, which means you can write off your work-related costs as a business expense on your taxes. For Uber and Lyft drivers, this includes things such as your miles driven, gas, oil changes, car repairs, cellphone service and accessories and car washes. Even supplies, such as water bottles and gum for your riders, count.
Tracking your expenses and mileage might seem like a lot of work, but there are tools that make it less painful. To help make tracking her expenses easier, another driver, Sandy, used a separate credit card for gas. Lyft also provided her with the tools to help her figure out her tax payments.
“Lyft calculates the mileage driven directly in the app, so I was grateful to have their weekly reports and annual tax form with the totals already calculated,” she said.
Elizabeth, another Lyft driver, uses the QuickBooks Self-Employed app. “It helps me keep track of what to set aside for taxes, and it even tracks my mileage for me,” she said.
After her rocky tax experience, Janessa started using the Stride app. “It tracks all of your miles and can add in when you buy goodies for your passengers, or get your car washed, which can be deducted from your taxes at the end of the year. It’s really been a lifesaver,” she said.
3. You need to strategize your driving time.
There’s an ongoing debate about whether Uber and Lyft drivers make more money on short trips or long ones. The average Uber cab trip in the United States is just 6.4 miles, according to data from SherpaShare, a company that helps on-demand workers track their mileage and analyze their time. SherpaShare co-founder Ryder Pearce said drivers tend to like longer rides to break up the monotony and get a larger fare, Forbes reported.
Even though drivers technically make more money on longer rides, they have less control over the destination, which could hurt their income in the long run. For example, if a passenger gets dropped off in the middle of nowhere or in a suburban area, the drivers probably have to travel longer and farther to get back to a high-traffic area
Some drivers prefer to target riders with shorter commutes, even though they make less money on each trip. That way, they stay in high-traffic areas, making it easier to pick up the next rider. Turning down rides can impact a driver’s acceptance rate, which companies use to measure performance.
“If you turn down a longer drive, it can impact your overall acceptance rate,” Lyft driver Elizabeth said.
Whether you decide to target short or long trips is up to you. As with most things in life, it’s all about balance. With some trial and error, you’ll figure out the right mix to maximize your work time, increase your earnings and keep your acceptance rates high.
4. Your ratings matter -- a lot.
Both Uber and Lyft have a driver rating system to encourage good customer service and driving habits. The companies can kick you out of the system for having poor customer reviews. The system is built on a scale of one to five stars, with five being the best. Lyft recommends drivers keep their rating at least at 4.8 stars, while Uber expects a minimum 4.6-star average. If you go below those averages, you might not be able to drive for the company anymore.
The bar is high, but it’s not difficult to keep your ratings up with some good old-fashioned customer service. Lyft driver Sandy recommended making the customers feel as though they are more than just a passenger in the car, “with total control of the temperature, windows and even music.”
Lyft driver Elizabeth said keeping a clean car is also key to a stellar rider experience. “It should go without saying, but have a clean car, both visually and scent-wise. I’ve been in some smelly cars as a rider.”
She also recommended offering treats and extras, such as lollipops and an auxiliary cord. “Riders get excited to listen to their own music, and everyone loves candy. Lollipops are cheap, and I don’t have to worry about them melting in the car,” she said. “Some other things that might help: bottles of water, gum and baby wipes.”
Uber driver Janessa agreed that extras, such as charging cords, are important to customers. Just as important: delivering service with a smile.
Uber and Lyft drivers aren’t just at the mercy of their customers, though; this rating system is a two-way street. Drivers rate their passengers, too, so good behavior, pleasant conversation and general respect are encouraged by both parties.
5. Your hourly income could be lower than expected.
People who drive for Lyft make about $17 an hour, not including bonuses or tips, although the driver’s salary can range from $5 to $40 an hour, according to data from Glassdoor. The hourly income for people who drive for Uber isn’t available on Glassdoor, although the site said the national average salary is about $30,000 a year. Whether you drive for Lyft or Uber, your income can fluctuate, depending on where you work and your out-of-pocket costs.
San Diego Lyft driver Sandy said she was surprised by how her expenses impacted her take-home pay. “After calculating the time I was behind the wheel and how much I was making, it averaged to about $10 an hour,” she said. “It was definitely a lot less than I expected, considering I was having to pay for gas and set aside a portion of the money earned to put toward taxes.”
No comments:
Post a Comment