Intuit Academy Tax Practice Exam

For a self-employed rideshare driver, what type of income should be included on their Schedule C?

1. A cash tip from a passenger

2. An expense for car detailing

3. The cost of gas purchased

4. Sales from merchandise

The correct answer is: A cash tip from a passenger

For a self-employed rideshare driver, including cash tips received from passengers as income on Schedule C is essential because all income earned from business activities must be reported to the IRS. This includes not only the primary fares earned for rides but also any additional payments, such as cash tips given directly by passengers. Reporting these tips ensures accuracy in declaring total income, which is crucial for tax compliance. In contrast, the other options involve expenses rather than income. For instance, car detailing and gas purchases are costs that the driver incurs in the course of operating their rideshare business, and while these expenses can be deducted on Schedule C, they do not represent income. Similarly, sales from merchandise could be relevant if the driver were selling items as part of their business, but for the context of a rideshare driver primarily earning through fares and tips, this option does not apply to the main income streams. Hence, the correct choice aligns directly with the requirement to report all earnings received from providing rides, including tips.