Attention Company Drivers, Owner-Operators & Independent Contractors
If you haven’t filed your tax return yet it’s time to get things together. If you itemize we recommend getting help from a tax professional, preferably one who specializes in trucking. It doesn’t matter if you’re a company driver, independent contactor or owner-operator, you will benefit from having your taxes prepared by a tax preparer that specializes in trucking.
Company Driver’sMany company drivers miss out on legitimate deductions and bigger refunds by not itemizing.
If you file an itemized tax return, you can deduct employee business expenses you incur but are not reimbursed for. You can deduct any expenses that are necessary or required in the performance of your job and/or operation of the truck but are not reimbursed by your employer, such as, uniforms, work boots, gloves, logbooks, maps, cell phone, CB, tools, etc. These deductions are only available if you itemize and are not available if you take the standard deduction. Remember, you are also entitled to the per diem allowance for overnights to cover the cost of meals and incidentals while on the road. However, this deduction is only available if you are notreimbursed for meals and you itemize. Many company drivers are paid a per diem based on miles as part of their wage; this portion is non-taxable and would disqualify you for the per diem deduction.
To determine if you will benefit from itemizing, the total of all your individual deductions must be greater than the Standard Deduction.
Standard Deduction For Tax Filing Year 2009
Married Filing Jointly & Qualifying Widow(er)………… $11,400
Head of Household………………………………………… $8,350
Married Filing Separately………………………………… $5,700
For example, if you are a single company driver and your only deduction is your per diem for overnights, your deduction for overnights must total more than the standard deduction.
Let’s say your overnights for the year total 250
250 overnights multiplied by the $52. per diem rate = $13,000The allowable per diem deduction is 80% of the total, therefore 80% of $13,000 = $10,400The Standard Deduction for a single company driver is $5,700 – However with 250 overnights you would qualify to itemize with $10,400 in deductions. By itemizing you will have $4,700 more in deductions than if you had used the Standard Deduction and to that you may add other itemized deductions, like the ones mentioned above.
Transportation Workers Special Per Diem RateThe 2009 per diem rate for meals is $52.00 per day for 1/1/09 – 9/30/09 and increased to $59.00 per day 10/1/09 – 12/31/09 with 80% of the total per diem deductible. 2010 rate is $59.00 per day.
Owner-Operators & Independent Contractors
The most important things for you to do are:
• Compute your income received for the year from deposits made or from your settlement statements. Confirm that the amount reported on your 1099’s matches your records. If the amounts do not match find out why. If your income has be improperly reported and not corrected your tax preparer should report the incorrect amount as it appears on your 1099 but then make an adjustment to the correct amount and file the return along with a letter of explanation.
• Separate and total all your business expenses by category: fuel, parts, repairs, tires, insurance, telephone, tolls, supplies and loading & unloading expenses. Your expenses are determined by checks written, cash (receipts), credit card charges (review statements) and deductions from settlement statements.
• Count your days away from home overnight working from your logbooks. This number will be used to calculate your per diem amount for meals. Be sure you hold on to your logbooks as backup for at least 3 years after the tax return is filed.
• Make copies of all contracts of purchases and/or leases for equipment acquired during the year including loan information if financed. If you sold or traded equipment you will need the date, sales price and details of the transaction.
• Gather all your personal data, such as mortgage interest and property taxes paid, interest and dividend income, income from sales from stock and rental property information. Important: if you sold stock, you need to know date and cost of original purchase, and the date and amount of sale. If you sold a property you will need to know date acquired, cost and cost of any improvements over the years.
• Make a note for your tax preparer if you have or are going to make any contributions to an IRA, SEP, Simple IRA, and/or Keogh retirement plan.
• List all estimated taxes paid with amounts and date paid.
You want to make sure you have back up documentation for everything that appears on your tax return in the event of an audit.
Deductions Most Commonly Missed
Business Use of Home (if you operate business from your home using a room or other space as an office, you may qualify for this deduction).
Business Use of Personal Vehicle (2009 mileage rate is 55 cents per mile anytime you use your personal vehicle for business, such as picking up truck parts, business banking, runs for office supplies, postage etc.).
Accelerated Depreciation from Section 179 (if you acquired a tractor or trailer during 2009, you have the option of an immediate write-off of up to $250,000 if you choose. Be careful because electing faster depreciation can result in higher tax bills down the road).
Most tax preparers send out an income tax organizer to their clients to make the information gathering process easier. If you did not receive a tax organizer from your tax preparer you are welcome to call us and get one free of charge. We recommend using a tax organizer from a tax preparer who specializes in the trucking industry.
If you have your tax return prepared and feel the results are not accurate do not file the tax return. It is always advisable to get a second opinion before filing. Once a tax return is filed the only way to correct an error is by amending the original return, which can be costly. It is usually better to make any corrections prior to filing.
This article has been presented by MBA Tax & Bookkeeping Service, a company proud to provide Corporate/LLC filings, income tax, bookkeeping and IRS problem resolution services to truckers in all states. If you would like additional information or have questions, calls are always welcome. Contact us at 888-807-7971 or visit our website atwww.mbataxhelp.com.
This article is provided for informational purposes only and is not intended as legal or tax advice. Each individual business situation is different and the information contained herein is meant for general information purposes only. Specific tax and legal recommendations can only be made after an individual has consulted his or her qualified tax or legal professional.Read More Trucking Resources