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Discussing a rideshare worker's take-home pay as "profit" really accepts the framing of the company. Yes it's technically true that each driver is an independe

Discussing a rideshare worker's take-home pay as "profit" really accepts the framing of the company. Yes it's technically true that each driver is an independent contractor ("Small Business Owner"), but this designation is a farce without the ability to set pricing. The take-home pay isn't profit in practice, it's wages less unreimbursed expenses.

monochromatic 9y ago
From the driver’s perspective, is there any difference?
- fjsolwmv 9y ago
  Yes. It's not "profit" because they aren't paying themselves a wage for working. I own a business that I work at, so personal profit only counts after expenses, including at less minimum wage for hours worked.
  - misterbishop 9y ago
    Yeah, that's a really clear way of putting it.
- deleted 9y ago
  [deleted]
- facetube 9y ago
  Yes: self-employment tax.
  - regulation_d 9y ago
    Can’t this be avoided by being taxed as an S-corp?
    - hayksaakian 9y ago
      Not to any extent that is relevant for an Uber driver
    - jly 9y ago
      No. An individual who is the sole director, sole shareholder, and provides all of the services in an S-Corp will have any distributions classified as compensation subject to payroll taxes. There is a lot of established law on this subject.
      - theli0nheart 9y ago
        This is false. Any income in an S-corp that isn't paid via wages is not subject to FICA and Medicare, regardless of number of shareholders. That's a big reason why so many LLCs choose to classify themselves as S-corps. There are (or were, at least, before the latest tax bill) significant tax benefits to doing so. It doesn't matter how many shareholders there are, since an S-corp is not a disregarded entity, like a single-member LLC. From https://en.wikipedia.org/wiki/S_corporation#FICA https://en.wikipedia.org/wiki/S_corporation#FICA: > As is the case for any other corporation, the FICA tax is imposed only with respect to employee wages and not on distributive shares of shareholders. Although FICA tax is not owed on distributive shares, the IRS and equivalent state revenue agencies may recategorize distributions paid to shareholder-employees as wages if shareholder-employees are not paid a reasonable wage for the services they perform in their positions within the company. If you have data to support the contrary, please post your sources.
        jly 9y ago
        You are technically correct, the problem being that the IRS does not define what a "reasonable wage" is. However, the intention of the law is that true income is taxed as income and not as distributions. When one individual provides 100% of the services of a business, is not reinvesting profits or paying employees, and is the sole full-time worker, they should be treated as an employee and taxed accordingly. Many people abuse the vagueness of this but that doesn't mean the IRS will agree if you choose to pay your Uber earnings as distributions not subject to employment taxes. You can read a summary of some of the established case law on this topic here: https://www.thetaxadviser.com/issues/2011/aug/nitti-aug2011.html https://www.thetaxadviser.com/issues/2011/aug/nitti-aug2011....
regulation_d 9y ago
Let’s say I’m a dry wall contractor. A general contractor comes along and offers me $20k for a job. I say “$25k?” and he says, “No, $20k.” If I take the job I am not magically transformed into an employee of his, simply because I lacked the bargaining power to negotiate the rate. The reason I am still a contractor is that I have absolute control over whether to agree to do that job at that price. There are obviously lots of factors that are considered in the employee/contractor analysis. I just don’t feel that “ability to negotiate rate” is a particularly important one when “absolute ability to refuse fare” is in the picture.
- pfortuny 9y ago
  MMmmmh, but you do not lose your job as a dry wall contractor. You lose your “uber driver” job if you do not accept uber’s fares. What am I missing?
  - regulation_d 9y ago
    As someone who hasn’t driven for Uber, I’m not sure what that looks like. What are the conditions under which you would lose you “uber driver” job?
    - codegladiator 9y ago
      Under the condition where the driver demands a higher amount of money. Or even their fair share.
  - ancap 9y ago
    "Dry wall contractor" is a pretty generic job title. "Uber driver" is very specific including the "location" where the driver is working. To make the analogy fair you'd have to do have a "Dry wall contractor for Boeing" or similar.
    - regulation_d 9y ago
      Unless there are non-competes in place, the analogy is fine. You have the freedom to use the platform or to not use it, and often you have the freedom to use other platforms simultaneously.

monochromatic 9y ago

From the driver’s perspective, is there any difference?

fjsolwmv 9y ago
Yes. It's not "profit" because they aren't paying themselves a wage for working. I own a business that I work at, so personal profit only counts after expenses, including at less minimum wage for hours worked.
- misterbishop 9y ago
  Yeah, that's a really clear way of putting it.
deleted 9y ago
[deleted]
facetube 9y ago
Yes: self-employment tax.
- regulation_d 9y ago
  Can’t this be avoided by being taxed as an S-corp?
  - hayksaakian 9y ago
    Not to any extent that is relevant for an Uber driver
  - jly 9y ago
    No. An individual who is the sole director, sole shareholder, and provides all of the services in an S-Corp will have any distributions classified as compensation subject to payroll taxes. There is a lot of established law on this subject.
    - theli0nheart 9y ago
      This is false. Any income in an S-corp that isn't paid via wages is not subject to FICA and Medicare, regardless of number of shareholders. That's a big reason why so many LLCs choose to classify themselves as S-corps. There are (or were, at least, before the latest tax bill) significant tax benefits to doing so. It doesn't matter how many shareholders there are, since an S-corp is not a disregarded entity, like a single-member LLC. From https://en.wikipedia.org/wiki/S_corporation#FICA https://en.wikipedia.org/wiki/S_corporation#FICA: > As is the case for any other corporation, the FICA tax is imposed only with respect to employee wages and not on distributive shares of shareholders. Although FICA tax is not owed on distributive shares, the IRS and equivalent state revenue agencies may recategorize distributions paid to shareholder-employees as wages if shareholder-employees are not paid a reasonable wage for the services they perform in their positions within the company. If you have data to support the contrary, please post your sources.
      - jly 9y ago
        You are technically correct, the problem being that the IRS does not define what a "reasonable wage" is. However, the intention of the law is that true income is taxed as income and not as distributions. When one individual provides 100% of the services of a business, is not reinvesting profits or paying employees, and is the sole full-time worker, they should be treated as an employee and taxed accordingly. Many people abuse the vagueness of this but that doesn't mean the IRS will agree if you choose to pay your Uber earnings as distributions not subject to employment taxes. You can read a summary of some of the established case law on this topic here: https://www.thetaxadviser.com/issues/2011/aug/nitti-aug2011.html https://www.thetaxadviser.com/issues/2011/aug/nitti-aug2011....

regulation_d 9y ago

Let’s say I’m a dry wall contractor. A general contractor comes along and offers me $20k for a job. I say “$25k?” and he says, “No, $20k.” If I take the job I am not magically transformed into an employee of his, simply because I lacked the bargaining power to negotiate the rate. The reason I am still a contractor is that I have absolute control over whether to agree to do that job at that price. There are obviously lots of factors that are considered in the employee/contractor analysis. I just don’t feel that “ability to negotiate rate” is a particularly important one when “absolute ability to refuse fare” is in the picture.

pfortuny 9y ago
MMmmmh, but you do not lose your job as a dry wall contractor. You lose your “uber driver” job if you do not accept uber’s fares. What am I missing?
- regulation_d 9y ago
  As someone who hasn’t driven for Uber, I’m not sure what that looks like. What are the conditions under which you would lose you “uber driver” job?
  - codegladiator 9y ago
    Under the condition where the driver demands a higher amount of money. Or even their fair share.
- ancap 9y ago
  "Dry wall contractor" is a pretty generic job title. "Uber driver" is very specific including the "location" where the driver is working. To make the analogy fair you'd have to do have a "Dry wall contractor for Boeing" or similar.
  - regulation_d 9y ago
    Unless there are non-competes in place, the analogy is fine. You have the freedom to use the platform or to not use it, and often you have the freedom to use other platforms simultaneously.