How to file a 1099-MISC or 1099-K using Credit Karma Tax

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How to file a 1099-MISC or 1099-K using Credit Karma Tax

By JANET BERRY-JOHNSON

The growth of the on-demand economy has one not-so-fun side effect for many tax filers: more complicated tax return preparation.

The good news is Credit Karma Tax provides an easy-to-follow -- and free! -- way to file your tax return. We also have a dedicated support team to handle your questions. All you need to do is sign up for a free Credit Karma account, and you'll be able to prepare your return and keep tabs on your credit at the same time.

How to get started

If you don't have a Credit Karma account, head to www.creditkarma.com and click "Sign up for free" in the upper right-hand corner.

After answering a few questions and verifying your identity, you'll be able to log in to your Credit Karma account and get started with Credit Karma Tax.

1. Find the 'Tax' option at the top of the page.

2. Gather your Form 1099s.

If you're an independent contractor, such as a ride-share driver, you should receive a 1099-MISC or a 1099-K from every company that paid you at least $600 during the year. Even if the company didn't issue a 1099, you should still use your own records to determine your total self-employment income for 2016.

3. Gather your business expenses.

The IRS defines your business expenses as "the cost of carrying on a trade or business." The expense must be ordinary and necessary - an ordinary expense is common and accepted in your type of trade or business. A necessary expense is one that's helpful and appropriate for your business.

If you've been tracking your business expenses throughout the year, this step may be easy. If not, you'll need to spend some time collecting receipts and other documentation. For example, here are some common categories for ride-share drivers that may count as business expenses:

  • Auto loan interest (the part of the interest expense that represents your business use of the car).
  • Maintenance and repairs.
  • Gasoline and oil.
  • Insurance.
  • Vehicle registration and taxes.
  • The portion of your mobile wireless plan that's used for your business.
  • Gifts for passengers, such as bottled water or gum.
  • Business-related parking fees and tolls.

You'll also need to know how many miles you drive for work and your total personal miles for the year.

Here's an example of what your totals might look like:

If you have been working as a ride-sharing driver, but haven't been diligent about tracking your mileage and expenses during the year, start with the on-trip mileage tracked when you have a passenger in the car. Ride-share apps don't track miles while driving to a passenger or driving while waiting to be matched, but you may be able to recreate those miles using your trip logs and Google maps.

Next, go through your credit card and bank statements to look for deductible business expenses. Take notes on what was purchased and how each expense relates to your business.

How to file

4. Start with the basics.

Start with the "Basic Info" section, where you'll enter personal information including name, Social Security number, date of birth, address, and information on your spouse and dependents (if applicable). Then you can move on to the "Federal Taxes" section to start entering income and expenses.

5. Enter your income.

If you received a 1099-MISC, start in the "Wages & Income" section. There you'll be asked a series of questions about the types of income you have. If you received a Form 1099-MISC, answer "Yes" when asked. If you have multiple 1099 forms, you'll need to enter them one by one.

Next, you'll see the 1099-MISC input form. Enter the information from your 1099-MISC exactly as it appears on the form, including the amount from Box 7, Nonemployee compensation. There may not be amounts in any of the other boxes on your 1099-MISC, but double check to be sure.

Several clicks later, you'll come to a screen that asks about the source of your 1099-MISC income. Check the radio button to categorize the source as income from your business.

In the next screen, you'll be asked to give your business a name. If you drive for multiple ride-share companies, you can simply call the business "Ride-share Driving".

Next, you'll have to report that you had income from a Personal Business / Schedule C. Select "Yes" when asked if you need to add a new Schedule C for a personal business or update an existing one.

On the next screen, you'll be asked for your business's contact information. Your business address may be the same as your home address. If so, Credit Karma Tax can auto-fill that information for you.

On the next screen, you'll be asked to classify your business. If you're a ride-share driver, you should select "Transportation & Warehousing" as the principal business or profession and "Taxi & limousine service" as the business description.

The next screen will ask about any 1099s you issued and prior-year losses.

As a general rule, you must issue a Form 1099-MISC to each person to whom you paid at least $600 for rents or services for your business. This may be uncommon for ride-share drivers, so unless this applies to you, leave those questions marked "No."

Next, answer a few more questions about your business. These questions will be automatically filled in with answers appropriate for most self-employed people, but take a look at the third question on the list: "Did you start or acquire this business in 2016?" If this is your first year in business, change this answer to "Yes."

On the next screen, the income you entered from your 1099-MISC will be auto-populated. Now, you need to add business income not reported on your 1099-MISCs.

If you received a 1099-K, you'll add the amount from Box 1 to "Merchant card and third-party network payments." If you had any additional income from this business that wasn't reported on a 1099-MISC or a 1099-K, you'll add that amount under "Gross Receipts or Sales."

6. Enter your expenses.

On the next screen, you'll enter business expenses. Note that the gross income reported on your 1099-K may not include the money you received in fares and the commissions and fees the ride-share company took on each ride. You'll need to deduct those commissions as a business expense. Look for that amount on your ride-share tax summary and enter it under "Commissions and fees."

Continue entering other business expenses on the next four screens. Don't enter any vehicle expenses, as those will be entered later. If any expenses don't seem to fit into any of the categories, hold on to them. You'll have a chance to enter them later.

7. Enter your vehicle expenses.

You will come to the screen that asks "Do you have expenses for a car or light truck that are related to Ride-share Driving?" If this is true for you, answer "Yes."

Then provide some basic information about your vehicle, including a description and the date you began driving for business.

On the following screen, you'll enter your business and personal miles driven during the year. If you use your car for both business and personal purposes, you can only deduct the the cost of its business use.

Next, you'll select whether to use the standard mileage rate or actual expense method for deducting vehicle expenses.

For most ride-share drivers, the standard mileage rate may give you the largest deduction, but you might be better off using the actual expense method if you had a lot of repair costs.

Keep in mind that if you use the actual expense method in the first year you use the vehicle for business, you have to keep using that method. In other words, to use the standard mileage rate for a car you own, you must choose to use it in in the first year you used the vehicle for business. Then, you can switch between the standard mileage rate and the actual expense method in subsequent years to take advantage of the largest deduction for you.

Also keep in mind that you should not include any vehicle expenses here except for parking and tolls. Other vehicle expenses, such as gasoline, oil and repairs, are accounted for in the standard mileage rate.

If you use the standard mileage rate for a year, you can't deduct depreciation, lease payments, maintenance and repairs, gas (including gas taxes), oil, insurance or vehicle registration fees.

However, you can deduct interest on your auto loan, registration and property tax fees, and parking and tolls (this is in addition to the standard mileage rate deduction of 54 cents per car business mile driven).

Finally, you'll answer a few more questions about your vehicle. Review these questions carefully. You should answer "Yes" to the last question if you have trip logs to document your deduction. Most ride-share services keep a log of trips so save those for your records.

8. Enter your other expenses.

Now you'll be able to enter other expenses that didn't fit into categories mentioned above. If you're a ride-share driver, these might include your wireless plan, cellphone and charger and parking and tolls - but only the portions that were for business use. Keep clicking "Add New Expense" until you've entered them all.

If you chose to use the actual expense method earlier, you would have been prompted to enter your actual vehicle expenses then.

9. Enter your health insurance.

If you paid out-of-pocket for health or long-term care insurance, you might be able to deduct these expenses if you meet certain criteria. Enter the totals here.

10. Enter your depreciation.

If you purchased equipment for your business that have a determinable useful life and are expected to last more than one year, you may be able to depreciate those assets. Add a description of the property, how long you'll use it, the date you started using it for business, its cost and the percentage of business use.

If you use the equipment more than 50 percent for business in the year you place it in service, you may be able to take a Section 179 deduction for the cost of the item instead of recovering the cost by taking depreciation deductions. For instance, if you purchased a dashboard camera for $100 and used it solely for business, you may be able to take a $100 Section 179 deduction for the item rather than depreciating it over three years.

This should give you the main information you need to complete the business portion of your tax return using Credit Karma Tax. Go on to enter the rest of your personal income, deductions, credits and other items. If you need more help, visit our Tax Help Center or contact member support.

About the Author: Janet Berry-Johnson is a CPA and a freelance writer with a background in accounting and insurance. Her writing has appeared in Forbes, Freshbooks, The Penny Hoarder, Discover Student Loans, Chase News & Stories, Capitalist Review, Guyvorce and Intuit's Firm of the Future blog. Janet lives in Arizona with her husband and son and their rescue dog, Dexter.

Editorial Note: The opinions you read here come from our editorial team. While compensation may affect which companies we write about and products we review, our marketing partners don't review, approve or endorse our editorial content. Our content is accurate (to the best of our knowledge) when we initially post it, but we don't guarantee the accuracy or completeness of the information provided. You can visit the company's website to get complete details about a product. See an error in an article? Use this form to report it to our editorial team. For questions about your Credit Karma account, please submit a help request to our support team.

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All Comments

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1 Contribution
8 People Helped

Helpful to 8 out of 9 people

There doesn't appear to be a way to enter 1099-K information in the online form.  The instructions above don't match what appears on the screen.

1 Contribution
5 People Helped

Helpful to 5 out of 5 people

I am trying to enter my 1099-k income from Uber but there is no option to enter this type of income...why not?  Uber pointed us to this site and said it would be "easy" to file and everything would make sense.  Its not making any sense nor is it easy as the boxes for a 1099-misc are not the same. 

1 Contribution
2 People Helped

Helpful to 2 out of 2 people

Same here, none of this is working. Where is the support?

1 Contribution
2 People Helped

Helpful to 2 out of 2 people

Having the same issue. The way to enter my 1099-K income doesn't match what is on here. And almost a month without any reply to the first poster who originally pointed out the issue? What gives?

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