# 401k? tax?



## UBERALLES158 (May 30, 2019)

May I ask :

If I do ubereats / doordash, assume 5000/month , annual income 60000 USD,

Could I join 401k ? or someththing else? 

tax? 60k not net annual income, gas, car maintain?
so how to calculate?
thanks


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## Uberbrent (Mar 22, 2016)

Ask a tax advisor or an accountant. But here is a hint. Companies offer 401-k’s...you are not an employee. You could do an IRA just like anyone.


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## Seamus (Jun 21, 2018)

UBERALLES158 said:


> May I ask :
> 
> If I do ubereats / doordash, assume 5000/month , annual income 60000 USD,
> 
> ...


Like @Uberbrent said as a ft driver you'll be talking about an IRA not 401k. Find a really good financial adviser and they will set you on the right path. Good idea thinking of the future. Good luck.


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## aluber1968 (Aug 7, 2016)

UBERALLES158 said:


> May I ask :
> 
> If I do ubereats / doordash, assume 5000/month , annual income 60000 USD,
> 
> ...


There are various options available. The simplest one is an IRA. 
Based on your family, age and tax situation you need to figure out Roth or conventional.


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## Diamondraider (Mar 13, 2017)

UBERALLES158 said:


> May I ask :
> 
> If I do ubereats / doordash, assume 5000/month , annual income 60000 USD,
> 
> ...


You can do a self-directed 401k and if set up properly, you can contribute as an employee and "match" the funds from your sole proprietorship


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## UBERALLES158 (May 30, 2019)

thanks,
GI=gross income=60k
AGI=
deduction=24800,cost

assume 18000*10%=1800tax
IRA-7000-7000, than only 4000=400tax (save 1400tax)

after retirement, money from IRA almost no tax

0-18550，10%

tax

-income


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## Seamus (Jun 21, 2018)

Diamondraider said:


> You can do a self-directed 401k and if set up properly, you can contribute as an employee and "match" the funds from your sole proprietorship


That's an excellent way to go but you have to be serious about being a official business owner. He must register the sole proprietorship in whatever format he chooses and be committed to the formality of being an independent business owner in the long term. Also he must have earned income already from his enterprise and be somewhat financially savvy to direct his investments. Kudos to you for knowing about that, very few do.

The above describes very few Uber Eats drivers so for most the only feasible option is an IRA. I agree with you though, for those that are serious and committed for the long haul your suggestion is excellent.


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## KevinJohnson (Mar 23, 2020)

For 1099 filers there is the SEP IRA. Your contributions are counted as expenses. I use this to reduce my taxable earnings.


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## mousetom78 (Apr 1, 2020)

IRA all the way so you have greater flexibility on investment such as buying individual stocks. It is hard to make “60k” after deduction such as standard mileage, phone, accessories etc etc etc. Remember you are doing schedule c as self employed and your 1099 is just ur revenue. Bank dont by your 1099 when apply for loan such as mortgage but they rather go by your “profit” often mistaken as your taxable income. For me I have a day job with state government for benefit and uber is my side hustle net me around 40k and it turned a lot of my common expenses such as cars, phone, internet and other stuff into writeoff vs my w2 as liability as bills. I only pay taxes about half of the 40k.


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## FLKeys (Dec 27, 2018)

UBERALLES158 said:


> May I ask :
> 
> If I do ubereats / doordash, assume 5000/month , annual income 60000 USD,
> 
> ...


You can set up a Solo 401(k) with a bank, Vanguard makes it real easy to do and has minimal fees if you invest in Vanguard funds. Keep in mind you need to make a taxable profit to invest it in a Solo 401(k). You can make both the employee and employer portion contributions making it the best way to put away money in a retirement account to off set your taxes. You can put in 100% of your taxable profit from Self employment income. You can not put W-2 income into it.


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## mousetom78 (Apr 1, 2020)

401k is only good if your employers match. For greater flexibility always join IRA.


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## UberTaxPro (Oct 3, 2014)

UBERALLES158 said:


> May I ask :
> 
> If I do ubereats / doordash, assume 5000/month , annual income 60000 USD,
> 
> ...





UBERALLES158 said:


> May I ask :
> 
> If I do ubereats / doordash, assume 5000/month , annual income 60000 USD,
> 
> ...


You should research the following, there's advantages & disadvantages for each depending on your circumstances & goals. 

Traditional or Roth IRA
Solo 401(k)
SEP IRA
SIMPLE IRA
Defined benefit plan


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## FLKeys (Dec 27, 2018)

mousetom78 said:


> 401k is only good if your employers match. For greater flexibility always join IRA.


Depends on your situation. IRA's have limits that you can put away each year. I max out my IRA at the beginning of every year, with a SOLO 401(k) I can put away any would be taxable income to make my business tax $0 that year and off set the tax liability for when I retire.

Again a SOLO 401(k) is not an option if you don't make a taxable profit.


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## UBERALLES158 (May 30, 2019)

thanks,

I read some articles:

do most uber/eats drivers have negative taxable income?

I guess the cost ( common expenses such as cars, phone, internet and other stuff),

so if I make only 50k GI(gross income), deduction 24800, expenses

then almost no tax for me to pay? (even no IRA 7000 or 14000)


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## UBERALLES158 (May 30, 2019)

thanks,
I know more now

uber tax

ubertax


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## UberTaxPro (Oct 3, 2014)

UBERALLES158 said:


> thanks,
> 
> I read some articles:
> 
> ...


Self employed business people (like yourself) have to pay into the social security & Medicare system. It's called "*self employment tax*" and many other derogatory names. In your above scenario (I'll round your NET INCOME to 25K) you'll owe $3825 in self employment tax. To make that $0 your net income would have to be less than $400.

You'll also owe some* income tax* on that 25K



UBERALLES158 said:


> thanks,
> I know more now
> 
> uber tax
> ...


I'm sure he's he's a nice guy but I wouldn't suggest taking tax advice from the "rideshare guy"


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## SOLA-RAH (Dec 31, 2014)

UBERALLES158 said:


> May I ask :
> 
> If I do ubereats / doordash, assume 5000/month , annual income 60000 USD,
> 
> ...


In regards to taxes, you'll owe a little income tax but will only be in the 12% bracket after deducting lots of expenses, plus the self-employment taxes calculated on your net profit.
You have two realistic choices for retirement savings: an IRA and an SEP-IRA. You should contribute the (current) $6,000 yearly max to a Roth IRA since your tax rate is solidly in the 12% bracket. Paying only 12% now for lifetime tax-free growth on your contributions is an unbeatable deal so take full advantage of it.
Setting up an SEP-IRA is easy too...I suggest Vanguard or Fidelity. The contribution works out to be ~15% of NET profit (not revenue). I've never grossed more than $20k/year driving uber and have had net profits as low as $3,000 for the year, but those little SEP-IRA contributions plus the growth really add up over time:


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## UBERALLES158 (May 30, 2019)

thanks,

assume a scenario:

drive 40k miles and earn 65k;;
fee(expenses)=20k ;;
mile deduction=40k*0.55=22k

65k-20k-22k=23k net income

23k-24800( husband and wife, family deduction)= negative= no tax

is it right? or what's wrong?


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## KevinJohnson (Mar 23, 2020)

40k miles closer to 40k $ gross


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## UBERALLES158 (May 30, 2019)

KevinJohnson said:


> 40k miles closer to 40k $ gross


thanks, then correct:

assume a scenario:

drive 40k miles and earn 40k;;
fee(expenses)=12k ;;
mile deduction=40k*0.55=22k

40k-12k-22k=5k net income

5k-24800( husband and wife, family deduction)= negative= no tax

is it right? or what's wrong?


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## SOLA-RAH (Dec 31, 2014)

UBERALLES158 said:


> thanks,
> 
> assume a scenario:
> 
> ...


Your mileage:earnings ratio is off. Doing this full-time will make it more like 1:1. And you can't claim expenses & miles...it's one or the other. The only way to be truly profitable at this is to keep your expenses to the bare bones minimum, so focus on driving as few miles as possible in the cheapest car possible while grossing as much as possible. A gross of $65k on a more reasonable 60,000 miles driven becomes a profit of right at $30k after taking the standard mileage deduction. You will owe self-employment taxes (employee&employer portion of Social Security and Medicare)on this $30k, which comes to ~$4,280.

Half of that $4,280 is deductible, so your AGI is now ~$27,900. After backing out the $24,800 MFJ standard deduction and the QBI, you won't owe any federal or state income tax. If you do owe tax, making an SEP-IRA contribution will wipe the rest of it out. You're eligible to make a $4,500 SEP-IRA contribution (15% of $30k), as well as a $6,000 RothIRA contribution for both yourself and your wife. (And you really should max your RothIRAs in this scenario that because it's truly untaxed money forever on the principal and the gains.)

Now for the actual cash money in your pocket: You grossed $65k and you paid $4,280 in self-employment taxes, so you've got $60,700 to work with. If you can get your actual expenses to the bare minimum 25¢/mile, your expenses out-of-pocket will be $15,000 for the year. If expenses are 40¢/mile, you're paying out $24,000. So you've got a $45k net to work with in the best case scenario, and ~$35k in a high-cost scenario. If you make the full $16,500 in retirement contributions, that leaves you with $1700-$2500 in monthly income (and $3000-$3800 if you forego the retirement savings...but you really, really shouldn't do that)
AND THATS IF NOTHING GOES WRONG! If it takes you 80,000+ miles to make that $65k, or you have a catastrophic car failure, or any accident while on the job causing you to lose your source of income, then you're guaranteed to lose money and head straight to the poorhouse. If you already own a paid-off, reliable car with 50-100,000miles already on the odometer, you can make it work. If you have to finance a car to do this I GUARANTEE YOU WILL LOSE MONEY FASTER THAN YOU MAKE IT.
Good luck!
Lastly, I'm not a tax professional but feel free to check my numbers.


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## UberTaxPro (Oct 3, 2014)

UBERALLES158 said:


> thanks, then correct:
> 
> assume a scenario:
> 
> ...


Are you talking about income tax, self employment tax or both? The standard deduction & other "family deductions" do not reduce self employment tax, only income tax.


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## UBERALLES158 (May 30, 2019)

SOLA-RAH said:


> Your mileage:earnings ratio is off. Doing this full-time will make it more like 1:1. And you can't claim expenses & miles...it's one or the other. The only way to be truly profitable at this is to keep your expenses to the bare bones minimum, so focus on driving as few miles as possible in the cheapest car possible while grossing as much as possible. A gross of $65k on a more reasonable 60,000 miles driven becomes a profit of right at $30k after taking the standard mileage deduction. You will owe self-employment taxes (employee&employer portion of Social Security and Medicare)on this $30k, which comes to ~$4,280.
> 
> Half of that $4,280 is deductible, so your AGI is now ~$27,900. After backing out the $24,800 MFJ standard deduction and the QBI, you won't owe any federal or state income tax. If you do owe tax, making an SEP-IRA contribution will wipe the rest of it out. You're eligible to make a $4,500 SEP-IRA contribution (15% of $30k), as well as a $6,000 RothIRA contribution for both yourself and your wife. (And you really should max your RothIRAs in this scenario that because it's truly untaxed money forever on the principal and the gains.)
> 
> ...


THANK YOU VERY MUCH
I have whole idea now.

but the 4th sentence in the third section seems wrong?

cost scenario. If you make the full $16,500????? in retirement contributions, that leaves you with $1700-$2500 in monthly income (and $3000-$3800 if you forego the retirement savings...but you really, really shouldn't do that)

10500?right? 4500+6000???


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## SOLA-RAH (Dec 31, 2014)

UBERALLES158 said:


> THANK YOU VERY MUCH
> I have whole idea now.
> 
> but the 4th sentence in the third section seems wrong?
> ...


$4,500 SEP-IRA
$6,000 your RothIRA
$6,000 your spouse's RothIRA
=$16,500 total

OR you can go ahead and be mean to your spouse, make them mad, and lose everything in the divorce.


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