How to report 1099-MISC or 1099-K income using Credit Karma Tax®

Driver plans to report 1099-MISC income with Credit Karma Tax Driver plans to report 1099-MISC income with Credit Karma Tax Image:

In a Nutshell

Income reporting is different when you’re self-employed, whether it’s your full-time freelance job or a side gig. Here’s what you need to know about reporting 1099 income using Credit Karma Tax®.

Editorial Note: Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors' opinions. Our marketing partners don’t review, approve or endorse our editorial content. It’s accurate to the best of our knowledge when it’s posted.
Advertiser Disclosure

We think it's important for you to understand how we make money. It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials.

Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates.

Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.

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 that 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 already have a Credit Karma account, head to creditkarma.com and click Tax at the top of the page.

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. If the company didn’t issue a 1099, you can still use your own records to determine your total self-employment income for 2018.

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-share 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 re-create 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 Tell us about yourself 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 it’s on to W-2 entry. If you have any W-2s you can enter them here, or you can hit Skip on the bottom left here if you won’t be entering W-2s on your return.

Next you’ll be taken to the Build your tax packet section. You’ll select the I was self-employed or have a side gig option along with other income and expenses that apply to you for 2018.

5. Enter your income

If you received a 1099-MISC, you’ll hit Start next to the 1099-MISC section of the I was self-employed or had a side gig card. There you’ll be asked a series of questions about the types of income you have.

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.”

When you’re done entering all your 1099-MISCs you’ll be taken back to the Your tax packet page. You’ll now see your 1099-MISC entries on the Schedule C line (we’ve created a Schedule C for you based on your entries in the 1099-MISC section).

Next, you’ll go into the Schedule C section and click on the name of the business you linked to your 1099-MISC entry(ies).

On the next screen, you’ll be asked for your business contact information. Your business address may be the same as your home address. If so, Credit Karma Tax® can autofill 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, companies must issue a Form 1099-MISC to each person to whom they 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 2018?” 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 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 53.5 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, as shown below.

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% 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.