Uber drivers are technically independent contractors, and not employees, according to the company. There have been multiple court cases since the company was founded as UberCab back in 2009. Now serving more than 536 cities, Uber has become the most popular cab hailing app and service in the world.
In April 2016, Uber settled a lawsuit that kept all drivers in California and Massachusetts as independent contractors. This allowed the company to maintain continuity of service throughout the world, providing a reliable service to customers and giving its drivers the most freedom.
As part of Uber’s $100 million settlement, the company was allowed to give drivers more information about their ratings from drivers, and even compare their rating to other drivers. The settlement also allowed Uber to outline specific conditions that will result in a user being deactivated and banned from driving.
Not employing drivers benefits not only Uber, but also the drivers and customers. By not being required to pay for large benefit costs of employees, Uber has been able to expand more quickly and provide thousands of people with opportunities to become their own bosses.
These settlements also mean that drivers, as independent contractors, have more freedom on the amount of work they do through Uber. Drivers had previously been sent emails that notified them if they did not increase their ‘acceptance rate’ (which means how often they accept ride requests) to over 80%, then their account would be deactivated and they would not be able to continue working with Uber.
The email sent to users who did not reach an 80% acceptance rate read:
“Last month, you accepted less than 80% of trips you were connected with. This level of acceptance severely degrades the Uber user experience for both riders and partners, as well as lowering the amount you’re able to earn while using the platform. Our data shows that partners who accept at least 90% of trips earn 40% more than partners with low acceptance rates.
Please improve your acceptance rate if you want to continue to use the Uber platform.”
This changed with the settlements, allowing users the freedom to work as much or as little as they like.
Given that Uber drivers are independent contractors, they must report their income accordingly. This means filing an annual tax return in accordance with national, federal or state laws.
If an Uber driver is paid more than $600 in one year, the company will file the IRS Form 1099-MISC and/or the 1099-k with the IRS, and you will have to pursue these forms accordingly. You will be required to pay estimated quarterly taxes should you make a regular living from Uber, too.
To really be on top of your taxes, make sure you keep track of your miles and use mileage deduction to save money on tax, and educate yourself on the many deductions you can take.