Qualified tips on rideshare apps

Yuge

On the freetaxusa form there's the business income schedule C section, after I entered the information it asks "Does this person customarily and regularly receive tips from this job?", for rideshare apps I do, but for this year does tips count as deductions? On my 1099-k I have a breakdown of total wage, tips, and base pay. Can I add those as qualified tips or does it only count for bartenders, hotel workers, etc?

Austyn

Hello, Yuge,

Great question! The tip deduction isn't limited to just bartenders or hotel workers - rideshare drivers can qualify too.

Tips can be reported on either a 1099-NEC or a 1099-K, depending on how the payer reported them. The question “Does this person customarily and regularly receive tips from this job?” appears only in the 1099-NEC section, and should be answered “Yes” only if your tips are included in the amount reported on your 1099-NEC.

Since your tips are shown separately on your 1099-K, you’ll want to enter them in the 1099-K section instead. Here’s how:

1. Navigate under Income > 1099-K Income
2. Select who sent the 1099-K
3. Work through the screens to begin reporting information for the Rideshare Business (Schedule C)
4. Work through until you reach the 'Tell us about your income' screen
5. You’ll then see a line labeled “Enter any qualified tips that were included on your 1099-K, Box 1a.” Enter the tip amount from your 1099-K breakdown here.

Please note: Tips are not a business deduction. Instead, they are carried forward to Schedule 1-A, line 13, where the IRS uses them to calculate your allowed tip deduction.