Uber Drivers Losing Money

[Edsel]

Has been the subject of a lightly-reported news story, but it says that Uber drivers are not getting enough to pay their auto expenses.

Won't comment on the news story, but I had four of these part-time Uber drivers this year.  Each of them took the standard mileage rate, and without exception, all of them reported a loss on Schedule C.  I believe they all deducted legitimate mileage because there was payment receipts to induce the mileage.

The "true" cost obviously is not 53.5 cents per mile, but they are entitled to deduct that much.  If this is going to be the case with Uber, I can imagine IRS will pass regulations.  They are not going to stand for this.

One possibility:  I heard they are trying to make "employees" out of Uber drivers.  Can't imagine the drivers or Uber will put up with the effects of that.

 

Comments?

[jklcpa]

23 minutes ago, Edsel said:

I believe they all deducted legitimate mileage because there was payment receipts to induce the mileage.

The "true" cost obviously is not 53.5 cents per mile, but they are entitled to deduct that much. 

Did you ask, when logging mileage, if they applied the "business stop rule" meaning that the mileage from their home to the first pickup and the mileage from last drop off back home is commuting?  Basically, only miles driven while a customer is in the car is the deductible portion.

[Lee B]

According to a very large survey, the average Uber driver makes well under the federal minmum wage.

[Possi]

All my Uber drivers make money. They bring statements reflecting mileage, and those statements come from Uber, so I know they are not overstated. We take deductions for airport fees, tolls, a portion of their cell phones, and car washes. They still make money.

[Possi]

And, for those who want to know, if someone pukes in an Uber, they are hit with a $200 fine immediately, before they sober up!

I didn't learn that by accident... my client told me.

[Edsel]

2 hours ago, jklcpa said:

Did you ask, when logging mileage, if they applied the "business stop rule" meaning that the mileage from their home to the first pickup and the mileage from last drop off back home is commuting?  Basically, only miles driven while a customer is in the car is the deductible portion.

No I did not ask this, and don't think it is fair.  Many of you will respond "Fair does not matter in tax law" but there logistically is no commuting other than the mileage to the first pickup and mileage home from the last pickup.  Only those few miles would qualify as commuting under the "business stop rule".  And if the driver does three pickups in a night, and comes home between pickups, then those commuting miles would be multiplied by three.

Had I asked this, I don't know that any of those drivers would keep mileage records to that extent.  All of them have other jobs and I'm sure they regard their "tax home" as being their residence for purposes of a 2nd job.  In a town the size of Nashville it would be typical to drive 3-4 miles to the first ride, drive 1 mile, and then 3-4 miles home.  My portrayal here is not strained at all, but really quite typical.  In such a case only 10% of his total mileage would be deductible.

I don't think the IRS is being ripped off under this scenario.  It is the driver that is being ripped off.

Interesting to hear from some of the rest of you - your drivers are making money.  Judy, thanks for your response.  Adds spice to the conversation. 

[ILLMAS]

I once prepared a tax return for a OTR trucker, was home 2-3 times a month for a few days and back to driving, gross income was about +200K, actual expensive were like +150K a year.  I had to ask him if all this driving was worth it, being away from his family and only pocketing 1/4 of his earnings.

[Possi]

There are so many easy telephone aps now, mileage is easy to keep. And with Uber, you check in to work, check out when off. They clock your miles for you. Oh well, worse overstatements have happened, I'm sure. The driver who LOST money every single year in my office was a courier. He picked up medical items from one place to another and literally drove all day. Reduced by commuting miles, they still lost money. But hey, he was retired and he enjoyed "working" at something, whatever the cost. He used his beater car for this gig and enjoyed it.

[Max W]

7 hours ago, cbslee said:

According to a very large survey, the average Uber driver makes well under the federal minmum wage.

The survey was done by MIT and is highly questionable.  They revised their results twice because their methodology was faulty.  The average went from $3.35/h to $8.85/h to $10/h.  

The drivers that are losing money are doing it part time, or are students and most likely working at the least profitable times of the day when the rates are at their lowest.  These drivers drop out of it within a few months.  

If this holds to Pareto's Law, approx. 20% of the drivers will produce 80% of the revenue. It is the same in other fields, sales, inventory, sports.

There has been some mention of the driver being declared employees.  So far, all the court tests, one federal and several states, have shot it down.  Even CA has tried but the state seems to have backed off.  Uber's HQ is in SF, so there could be political pressure being applied.

 

 

[Patrick Michael]

On 4/26/2018 at 3:52 PM, Edsel said:

On 4/26/2018 at 1:25 PM, jklcpa said:

Did you ask, when logging mileage, if they applied the "business stop rule" meaning that the mileage from their home to the first pickup and the mileage from last drop off back home is commuting?  Basically, only miles driven while a customer is in the car is the deductible portion.

 

I disagree that "Basically, only miles driven while a customer is in the car is the deductible portion."  I believe the mileage from the time they drop off their last fare to where they pick up their next fare would be deductible as long as they were "working" (signed onto the app and not going home between fares).   I have a couple of Uber drivers and they also told me that the mileage reported by Uber does not include the mileage when driving from one fare to pick up another so I have them using one the phone tracking apps to make sure they capture all their miles..

Edited April 27, 2018 by jklcpa
for clarity, moved response to outside of quote box

[jklcpa]

4 minutes ago, Patrick Michael EA said:

I disagree that "Basically, only miles driven while a customer is in the car is the deductible portion."  I believe the mileage from the time they drop off their last fare to where they pick up their next fare would be deductible as long as they were "working" (signed onto the app and not going home between fares).   I have a couple of Uber drivers and they also told me that the mileage reported by Uber does not include the mileage when driving from one fare to pick up another so I have them using one the phone tracking apps to make sure they capture all their miles..

Yes, I would agree with your scenario and would include miles between fares as related to business, and my statement in that case was too general. However, I would not include miles for the driver going back home between fares as business-related mileage because that would be commuting.

[Pacun]

In prior years, UBER reported only miles while the "taxi" was occupied with passengers. Last year, they sent the reports including miles that the driver was on line. That makes sense. I do believe that as soon as you start the application, you are working since you cannot be refusing pickups or your ratings will go under. All my uber drivers make money if not, common sense will tell the to get out of the business. I saw another preparer's returns for 3 years where the uber driver made 26K and after repairs AND MILEAGE his profit was 2K. His wife brought him to me because she was not getting a big refund and she wanted to file MFS. I showed her that her 25K filing MFS she was going to get a refund of $400 vs the $1,100 she got for the last three year, she gladly went back to the old preparer.  I don't want this type of clients so it is better they go away.

My brother was as an Uber driver and for sure he makes money and pays a lot of taxes.

As for the employee relationship to Uber... there is no way that the courts, states or IRS will make that relationship become other than independent contractor. Uber doesn't not train these drivers, Uber doesn't control their schedule and there is no employee/employer relationship.