Issue link: https://read.dmtmag.com/i/26876
HOW TO BECOME AN O/O MAX KVIDERA Tax Time As a self-employed driver, most expenses related to running your business are tax deductible M ost people think about taxes in April, but as an owner- operator, you should be thinking about your taxes every month. Your tax obligations include fed- eral and state income taxes. As an owner-operator, you’ll be required to pay estimated taxes each quar- ter, and you are responsible for set- ting aside funds for taxes. “We see almost every day a new owner-oper- ator who hasn’t set up automatic withholding, and all of a sudden at tax time they owe [thousands], and they don’t have it,” says Dennis Bridges, a CPA and tax preparer. You’re also responsible for self- employment tax based on net earn- ings. If you have a second truck and employ a driver, you’re responsi- ble for employee payroll taxes for federal and the state where you’re based, says Perry Wiseman, owner of Truckers Accounting Service. Using Form 2290, you must pay the annual Heavy Road Use Tax. The $550 fee covers trucks weigh- ing more than 55,000 pounds and is due by Aug. 1 for the July 1-June 30 period. You also face fuel and mileage taxes under the International Fuel Tax Agreement (IFTA). If you’re leased to a carrier, the company might handle the payments. Especially important are expenses you incur running your business. If it’s work related, chances are it’s deductible accord- ing to the Internal Revenue Service. “We tell our clients to supply us with everything except restau- rant and grocery store receipts,” says David Blair, owner of Blair Tax 30 TRUCKERS NEWS APRIL 2011 Consulting. “Everything they do on the road is deductible.” Keep every receipt or bill for tolls, cell phone use, showers, truck sup- plies and so on. If the receipt doesn’t specify the expense, write the details on the receipt. If you don’t get a receipt, write it down and note the date and place it in a notebook that you keep for the year. Keep your set- tlement statements and handwritten logbooks, not only for current taxes but for potential IRS audits. Blair says the IRS wants to see expense categories rather than item- ized deduction. He organizes his owner-operator client expenses into three categories: Truck expenses, such as fuel, maintenance and insurance; office supplies, such as cell phone bills and computer; and truck equipment, such as tools and work gloves. There are some expense excep- tions. Clothing generally isn’t deductible unless you have your name and company name applied to your cap or shirts or if you need steel-toed boots to load and unload your flat bed or if you’re a Flor- ida trucker who needs long-johns to run in the north in winter. Food and motel expenses are covered under a per diem for transportation workers, which is $59 a day and 80 percent deductible. The IRS “audited a woman driver who had about $10,000 in per diem,” Wiseman says. “The IRS asked for [proof]. She didn’t keep her logbooks, and it disallowed the deduction. The IRS can audit back three years. Typically, I tell people to keep them for five years.” You’ll also want to keep track of expenses back home. If you or your spouse makes work-related trips such as driving to a repair shop for tires, the mileage is deduct- ible, Bridges says. If you maintain a home office, its expenses, supplies and related costs, such as a com- puter and printer, are deductible. Bridges advises using an account- ing professional who knows the trucking industry. Contact that individual when you’re planning a major business transaction like dis- posing of your truck. “If you’re sell- ing it outright, your proceeds are going to be taxable,” he says. “If you traded it in on another tractor, there’s no taxable event, and you avoid a taxable gain.” DON’T OVERLOOK THESE CPA Dennis Bridges shares some common deductible expenses Air freshener Alarm clock Batteries Bedding Cab curtains Camera Coffee maker Coveralls Duct tape Facemask First-aid supplies Floor mats GPS device Hard hat Ice scraper Keys Lawn chairs Logbooks Luggage Map lamp Power cord Refrigerator Seat covers Sunglasses Tire gauges Trash bags Truck magazines Vacuum cleaner