Due to the pandemic, the well-known grocery delivery and pickup service Instacart has recently experienced an increase in popularity. Many people are utilizing the service to stay away from congested grocery markets and reduce their virus exposure. But with Instacart’s growing popularity comes the issue of tax classification. What does Instacart’s tax categorization entail for the business and its employees?
Instacart is classified as a C Corporation for tax purposes. As a result, it is a particular kind of business structure that is taxed independently of its owners. Shareholders of a C Corporation are the company’s owners; they are not held personally accountable for the debts or obligations of the business. Taxes on the company’s profits must be paid by the company, and shareholders must pay taxes on any dividends they receive.
Larger businesses with many owners or plans to raise capital through IPOs frequently prefer the C Corporation tax classification. It shields shareholders from liabilities and enables the business to raise money by selling stock. The profits of the corporation are taxed both at the corporate level and again when dividends are given to shareholders, resulting in double taxation.
Similarly, a W-9 form’s C Corporation classification is used to determine a firm or entity’s tax classification. The W-9 form’s objective is to give the details required for a business or individual to record payments made to the IRS. When an entity is listed as a C Corporation on a W-9 form, it must be taxed as one and is therefore a C Corporation. The fact that Instacart is a C Corporation for tax purposes indicates that it must pay taxes on its profits and that its shareholders must pay taxes on any dividends they receive. The tax status of employees that provide services for Instacart, such as shoppers and delivery drivers, is different. They must pay self-employment taxes on their income because they are regarded as independent contractors.
Instacart is, thus, a C Corporation for taxation purposes. This classification shields shareholders from liabilities and permits the business to raise money by selling stock. It also entails double taxes, though. Independent contractors are those who perform services for Instacart, and they are liable for paying self-employment taxes on their income. A business or entity’s tax classification is shown on a W-9 form by the C Corporation tax classification.