As an Instacart shopper, understanding your tax obligations is crucial for managing your finances and staying compliant with the law. One of the most important documents you‘ll receive is the Instacart 1099, which reports your earnings as an independent contractor. In this article, we‘ll dive deep into the world of Instacart 1099s, covering everything from what they are and how to get them to filing your taxes and managing your finances as a gig worker.
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The Rise of the Gig Economy and Instacart
The gig economy has experienced tremendous growth in recent years, with platforms like Instacart playing a significant role in this transformation. According to a 2020 report by Edison Research, an estimated 57 million Americans participated in the gig economy, representing 36% of the U.S. workforce. Instacart, in particular, has seen a surge in demand, with the company reporting a 500% increase in shoppers during the COVID-19 pandemic (Instacart, 2020).
As the gig economy continues to evolve, it‘s essential for Instacart shoppers to understand their role in this changing landscape and the tax implications that come with being an independent contractor.
What is an Instacart 1099?
An Instacart 1099 is a tax form that reports your earnings as an independent contractor for the company. There are two types of 1099 forms you might receive: the 1099-NEC (Non-Employee Compensation) and the 1099-MISC (Miscellaneous Income). Prior to the 2020 tax year, the 1099-MISC was used for most independent contractor earnings, but now the 1099-NEC is the primary form.
As an Instacart shopper, you‘ll likely receive a 1099-NEC if your earnings exceed $600 in a given tax year. This form will show your gross earnings, which includes all the money you made before any expenses or deductions.
Tax Implications for Instacart Shoppers
Being an independent contractor means you‘re responsible for paying your own taxes, including self-employment tax. This tax consists of Social Security and Medicare taxes, which would typically be split between an employer and employee in a traditional job. As a self-employed individual, you‘re responsible for both portions, which amounts to 15.3% of your net earnings.
| Tax Type | Rate |
|---|---|
| Social Security | 12.4% |
| Medicare | 2.9% |
| Total Self-Employment Tax | 15.3% |
In addition to self-employment tax, you‘ll also need to pay income tax on your Instacart earnings. Since taxes aren‘t withheld from your pay, you may need to make estimated tax payments throughout the year to avoid penalties. The table below shows the income tax brackets for the 2021 tax year (IRS, 2021).
| Tax Rate | Single | Married Filing Jointly |
|---|---|---|
| 10% | $0 – $9,950 | $0 – $19,900 |
| 12% | $9,951 – $40,525 | $19,901 – $81,050 |
| 22% | $40,526 – $86,375 | $81,051 – $172,750 |
| 24% | $86,376 – $164,925 | $172,751 – $329,850 |
| 32% | $164,926 – $209,425 | $329,851 – $418,850 |
| 35% | $209,426 – $523,600 | $418,851 – $628,300 |
| 37% | $523,601 or more | $628,301 or more |
The good news is that as an independent contractor, you can deduct business expenses from your earnings, which can lower your taxable income. Some common deductions for Instacart shoppers include:
- Vehicle expenses (mileage or actual costs)
- Phone and data plan costs
- Insulated bags or coolers
- Parking and tolls
- Health insurance premiums
- Home office expenses (if applicable)
According to a survey by The Rideshare Guy, a popular blog for gig economy workers, the average Instacart shopper spends $468 per month on vehicle expenses, which can add up to a significant deduction come tax time (The Rideshare Guy, 2021).
How to Get Your Instacart 1099
Instacart sends out 1099 forms to eligible shoppers by January 31st each year, covering the previous tax year. The company partners with Stripe to distribute these forms electronically, so keep an eye on your email inbox (and spam folder) for messages from Stripe or Stripe Express.
If you haven‘t received your 1099 by early February, don‘t panic. First, double-check that your email address is correct in your Instacart account settings. If everything looks good there, reach out to Instacart shopper support for assistance. In some cases, they may need to mail you a physical copy of the form.
Instacart Shoppers: 1099 vs. W2
Not all Instacart shoppers receive 1099s. In-store shoppers, who are part-time employees of Instacart and work in a single store, typically receive W2 forms instead. These shoppers have taxes withheld from their paychecks and are eligible for certain benefits, such as workers‘ compensation.
Full-service shoppers, on the other hand, are independent contractors and receive 1099s. They have more flexibility in terms of when and where they work but are responsible for their own taxes and benefits.
Filing Taxes with Your Instacart 1099
When it‘s time to file your taxes, you‘ll use the information on your Instacart 1099 to complete your return. If you‘re using tax preparation software, like TurboTax or H&R Block, you‘ll typically enter your 1099 information in the "Income" section.
If you‘re working with a tax professional, make sure to provide them with a copy of your 1099 along with any other relevant income and expense documentation. According to the National Association of Tax Professionals, the average fee for preparing a 1099 tax return is $457 (NATP, 2021).
Accurate record-keeping is essential for filing your taxes correctly and maximizing your deductions. Throughout the year, keep track of your earnings, expenses, and mileage using a spreadsheet, app, or old-fashioned pen and paper. Some popular tools for Instacart shoppers include:
- QuickBooks Self-Employed
- Stride Tax
- MileIQ
- Everlance
- Excel or Google Sheets
Proving Income and Minimum Earnings for 1099s
In some situations, you may need to prove your income as an Instacart shopper, such as when applying for a loan or renting an apartment. Your 1099 form and tax returns can serve as proof of income, but if you need documentation for a specific period, you can also use screenshots from the earnings section of the Shopper app.
Keep in mind that you‘ll only receive a 1099 if your Instacart earnings exceed $600 in a given tax year. If you make less than this amount, you‘ll still need to report your earnings on your tax return, but you won‘t receive a 1099 from Instacart.
Navigating the Challenges and Opportunities of Gig Work
While the flexibility and earning potential of gig work can be appealing, Instacart shoppers also face unique challenges, such as lack of benefits, income instability, and the need to manage their own taxes. According to a 2019 report by the JPMorgan Chase Institute, 58% of gig workers experienced income volatility of more than 30% month-to-month, compared to 37% of traditional workers.
Despite these challenges, many Instacart shoppers find the work rewarding and enjoy the opportunity to be their own boss. As one veteran shopper puts it:
"Being an Instacart shopper has given me the freedom to set my own schedule and be there for my family when they need me. It‘s not always easy, but with careful planning and a willingness to learn, it can be a great way to earn a living." – Maria, Instacart shopper for 4 years
To succeed as an Instacart shopper, it‘s essential to stay informed about your rights and responsibilities as an independent contractor. This includes understanding tax laws, seeking support when needed, and advocating for fair treatment and working conditions.
In recent years, there have been efforts to provide more protections for gig workers, such as the AB5 law in California, which aimed to classify many independent contractors as employees. While the law faced legal challenges and was ultimately overturned by Proposition 22, it sparked a broader conversation about the need for better labor standards in the gig economy.
Tips for Managing Taxes as an Instacart Shopper
Navigating taxes as an independent contractor can be challenging, but there are several steps you can take to make the process easier:
Set aside money for taxes: Aim to save 25-30% of your earnings to cover your tax obligations. Consider setting up a separate savings account for this purpose.
Keep detailed records: Track your income, expenses, and mileage to ensure accurate tax filing and maximize your deductions. Use a dedicated credit card or bank account for business expenses to simplify record-keeping.
Make estimated tax payments: If you expect to owe more than $1,000 in taxes for the year, consider making quarterly estimated tax payments to avoid penalties. The due dates for 2021 are April 15, June 15, September 15, and January 18, 2022.
Educate yourself: Stay informed about tax laws and deductions specific to gig workers and independent contractors. Attend workshops, read blogs and articles, and join online communities to learn from others in similar situations.
Seek professional help: If you‘re unsure about your tax situation, consider working with a tax professional who specializes in self-employment and gig economy taxes. They can help you navigate complex issues and ensure you‘re taking advantage of all available deductions and credits.
Real-Life Example: Sarah‘s Tax Journey
Sarah, an Instacart shopper for 3 years, shares her experience with managing taxes:
"When I first started shopping for Instacart, I had no idea about taxes or record-keeping. I just focused on earning as much as I could. But when tax time came around, I was in for a rude awakening. I ended up owing a lot more than I expected and didn‘t have enough saved to cover it.
That experience taught me the importance of staying organized and planning ahead. Now, I use a mileage tracking app and keep all my receipts in a dedicated folder. I also set aside 30% of my earnings in a separate savings account for taxes. It takes a bit of extra work, but it saves me so much stress come tax time.
My advice to other Instacart shoppers is to educate yourself, stay disciplined with your record-keeping, and don‘t be afraid to ask for help when you need it. It‘s not always easy, but with the right tools and mindset, you can thrive as an independent contractor."
The Future of Gig Work and Instacart
As the gig economy continues to evolve, it‘s crucial for Instacart shoppers to stay adaptable and informed. The COVID-19 pandemic has accelerated the growth of online grocery delivery, with Instacart reporting a 500% increase in shoppers during the pandemic (Instacart, 2020). While this surge in demand has created new opportunities for shoppers, it has also highlighted the need for better protections and support for gig workers.
Looking ahead, experts predict that the gig economy will continue to expand, with more and more people turning to platforms like Instacart for flexible work opportunities. However, there is also growing pressure for gig economy companies to provide better benefits, protections, and working conditions for their independent contractors.
As an Instacart shopper, staying engaged with these broader conversations and advocating for your rights can help shape the future of gig work and ensure a more sustainable and equitable experience for all.
Key Takeaways
- Instacart shoppers who earn more than $600 in a year will receive a 1099-NEC form for tax purposes.
- As independent contractors, Instacart shoppers are responsible for paying self-employment tax and income tax on their earnings.
- Keeping accurate records and deducting business expenses can help lower your taxable income.
- Seeking professional help and staying informed about tax laws and best practices are essential for success as an Instacart shopper.
- The gig economy is evolving rapidly, presenting both challenges and opportunities for Instacart shoppers and other independent contractors.
By understanding the tax implications of being an Instacart shopper, staying organized with your finances, and advocating for your rights and well-being, you can thrive in the gig economy and build a fulfilling career on your own terms.
