Instacart gives its shoppers the opportunity to earn money on their own schedule, and they have the option to get paid every single day if they want.
But does Instacart take out taxes? And what does that mean for tax season? Here’s the answer you’ve been looking for, so keep reading!
Does Instacart Take Out Taxes In 2023?
For its full-service shoppers, Instacart doesn’t take out taxes from paychecks. Instead, full-service shoppers are considered contract workers, and they must file a 1099 form with the IRS during tax season. However, in-store shoppers are Instacart employees, taxes are taken out of their pay and they file W-2s in 2023.*
This can be a complicated subject, so let’s untangle topics like how to file taxes for Instacart work, how you can expect to obtain your 1099 from the company, and even how to file it. Keep going!
Do You Have to File Taxes for Instacart?
There are three answers to this question.
First, if you are a part-time in-store shopper, you’re considered an employee of Instacart, and you must file your taxes for any money earned with your position.
Second, if you are a full-service shopper (and therefore a contract worker) and you have made less than $600, you do not have to file taxes for Instacart.
Third and finally, if you’re a full-service shopper who has made more than $600 with Instacart over the course of a calendar year, then you will have to file to pay your taxes.
That $600 threshold might sound like a lot if you’re just starting out, but it can gain on you quickly.
Full-service shoppers, once you’ve hit $600 earned with Instacart, you’re considered self-employed, and you are on the hook to pay the FICA tax.
That’s a tax rate of 15.3 percent- and it’s in addition to federal and state income taxes.
You will file a 1099-NEC (which replaced the 1099-MISC).
How Do You Get Your 1099 From Instacart?
You don’t have to do anything (at least at first) to receive your 1099 from Instacart.
The company is well-versed in self-employment tax law and sends out the forms by the end of January by email.
Since Instacart likely uses a third-party accounting system, it’s important that you keep your eyes peeled for the email, even in your spam box.
That’s because “Important Tax Document Enclosed” could look like junk mail to your email’s filters.
However, if you miss it or accidentally delete it, you can always request one by mail. You should do this as early as possible after January.
How Much Should You Expect to Pay in Taxes for Instacart?
Full-service Instacart shoppers who earn more than $600 in a calendar year tend to get dinged pretty hard come tax season.
That’s because they pay both parts of the FICA tax (W-2 earners only pay half), as well as federal and state taxes (and any local/city taxes that may apply).
A good rule of thumb is to expect to pay 25 to 30 percent of your gross earnings on taxes (the FICA tax alone accounts for over 15 percent).
Instacart now does a decent job of showing you how much you have earned over a given period, so you don’t necessarily have to keep track on your own.
To get an idea of how much you will have to pay for taxes, add up all your earnings for the year and multiply by .30 (or .25, but it’s better to estimate on the high end).
However, if you haven’t done a whole year of shopping (but you plan to) find your average monthly earnings, estimate the yearly total and then multiply by the tax rate of 30 percent.
If that number shocks you, good!
Hopefully seeing how it accumulates so quickly and easily will help you find the discipline to put a little bit aside from each pay.
You don’t want to be caught on the hook for thousands of dollars that you don’t have in April.
If you can, consider setting up your tax payments quarterly. This spreads out the payments so that you aren’t stuck with a huge bill once a year.
How Do You File a 1099 for Instacart?
Filing a 1099 from Instacart is relatively straightforward. Some people prefer to have their tax preparer do it, but if you’re going it alone with a website or software, here are the basics.
Per Ridester, you will need to have your 1099-NEC on hand in order to fill out the Schedule C form, which is where you record your earnings for the year.
You should also gather documents that you will need as evidence if you’re going to claim expenses, such as fuel.
There are also deductions you can claim (a deduction is taken off your taxable income to lower the amount you have to pay the IRS).
There are plenty of deductions you can likely claim as an Instacart shopper, whether they’re car-related or phone-related after all, it’s your main tool for shopping!
You can make some deductions based on your mileage for the year while delivering.
Or if you were to get a phone for the sole purpose of shopping for Instacart (keep your receipt!), that makes for an easy deduction.
It’s important to treat this information here as just that: information to get you started as you prepare for taxes.
In order to be truly informed when it comes to filing your taxes and claiming deductions/expenses, you should talk to a tax or tax law professional.
Full-service Instacart shoppers are contract workers, considered self-employed, and as such, must use their 1099-NEC forms to file taxes each year if they earned more than $600. Remember that the IRS also gets a copy of your 1099-NEC, so if the numbers don’t match up, you could end up in serious trouble.
**Disclaimer** The purpose of this article is to inform, and it is not meant to offer tax or legal advice. You should always consult with an accredited tax or legal professional before undertaking any official transaction.