Owner Operator Truck Driver? Here are some bookkeeping and tax tips.
Truck driving is one of the most financially rewarding careers out there, but it can take a toll on your personal life and your family too. Here are some questions to ask yourself before you sign up with any trucking company.
1. How much driving do you do annually?
2. Do you own your own truck or are you leasing?
3. Do you work a “natural” schedule or do you work overtime?
4. Are you willing to work weekends, holidays, etc.?
5. How long have you been doing this?
2. How to get business tax deductions on your personal tax return
Tax is one of the most misunderstood aspects of running a business. Tax season can make or break your year, and taxes are a major part of that. Here are some simple tips for getting the most out of it:
1. Don’t file as an LLC. You may think LLCs are great because they shield you from double taxation, but if you’re not an S corporation or partnership, you’ll be liable for both corporate and personal federal income taxes. If you want to take advantage of favorable state tax treatment, look into an S corporation; but if you think you might be subject to double taxation through a partnership or LLC, don’t file one.
2. Don’t try to save money by filing Schedule C as a sole proprietor instead of a C Corporation (for example). Since Schedule C is where ownerships usually end up on your tax return anyway, this is just wasting valuable time and filing the paperwork when there isn’t enough in your pockets to pay for it!
3. Many states offer generous tax credits for truck driver expenses (including maintenance costs) which can add up to thousands of dollars over the course of a year! These credits typically only apply to expenses incurred on qualifying vehicles that operate primarily in the state where they are registered—which is not always the case with trucks.
4. Keep records! Make sure your records are accurate and meaningful so that they can help prove your business' existence when audited by the IRS! Even if you have separate bookkeeping entities in each state where you live, keep track of all truck driver expenses so that they can be easily crosschecked with state-by-state tax returns (especially when calculating depreciation).
5. File early! The earlier you file your taxes, the more benefits you will receive in terms of deductions and credits like the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). When it comes to filing early, there is no such thing as too early—and finding out if there is any credit available might be one way to get some extra money back from Uncle Sam during tax season!
3. The key benefits of keeping good trucking business records
The owner-operator chart of accounts is an important tool for keeping track of both the expenses and income of a trucking business. It includes things like:
• Costs and expenses
• Equipment rental costs (and depreciation)
• Vehicle registration costs
• Depreciation on the truck, trailer, and other equipment rented out for the business (including depreciation on those parts)
• Vehicle insurance (interest expense, etc.)
• Sales taxes
The chart of accounts should be a helpful tool for both drivers and owners. It can be a great way to keep track of all your expenses, but it can also be used as a way to compare results when you are traveling between states or between different regions of your country. The setup we recommend to drivers is called “the flat rate route”. This allows drivers to focus on their primary business while still being able to charge taxes and fees in another state. This means that they don’t need to account for every cent that they might owe in another state, as they simply charge them back into their own state. This arrangement also allows drivers to save on vehicle insurance premiums by not having their policy tied up for months at a time.
4. Your best trucking business tax deductions are in the home office and vehicle write-offs
The tax code is complicated enough, but for truckers trying to keep up with the big tax changes, it can be a confusing maze with all kinds of special rules about home office and vehicle deductions.
Most people don’t realize that although many businesses use their business as a primary location for generating income, the owners of those businesses have to keep track of the business themselves. This means that some business expenses (in particular startup costs) are deducted from income and are subject to income tax, while others related to running a business (like property taxes) are not.
This is something you may be surprised to learn: many small businesses fail because they either fail to make a profit or fail to pay their taxes. And in this case, "fail" is best defined by how much they lose. If you think of it as like owning your own home rather than renting somebody else's apartment, you might be able to see why owning your own home makes sense. You can make any repairs or upgrades without incurring rent payments unless it causes you financial "collapse", and your personal property doesn't have as much value if you lose it in an accident (assuming no one pays for your damages).
The same holds true for trucks: if you take too long on repairs or upgrades, you're likely not going to have enough cash left over to cover them; and if you run into an accident that takes out more than half of your truck's value (or even damages more than the truck), then your insurance company will likely cancel out the value loss before paying out any claim.
Taxes are about fairness: if I'm driving my truck 50 miles per day and I get paid $5 per mile, I'm taxed on $1 ($50 × 5) every mile I drive when my truck isn't moving at all — that means I will pay taxes on $150 ($1 × 50). If I drive 2 mph slower than the speed limit on a highway rather than at 55 mph while I'm just driving around town and make $20 per hour driving my truck around town, then $100 is taxed when my truck isn't moving at all ($2 × 20). Taxation proceeds by removing money from one person's pocket without his consent; so no matter where he lives or what he earns (as long as he qualifies), people should pay taxes on whatever income they earn — whether as employees or independent contractors — so that everyone gets paid what they're owed. Of course some
5. You can deduct the cost of tolls and parking fees
Truck drivers who own their rigs often work long hours and the work schedule makes it hard to keep track of business details that are important for their bookkeeping records. They can earn a great living, but taxes can chew away at their truck driving profits.
While there is no need to deduct the cost of tolls and parking fees from your income, there are other ways of keeping track of them. You can deduct the amount you paid for tolls and parking fees for your auto, boat, or RV. But there is one problem with that: if you have hired a tow truck driver to help you move your vehicle, then you should have included in the amount you paid for towing services the amount they charged you per mile they towed your vehicle (this would include all times during which they towed it away). If however, you only towed it once during the entire time they towed it away (for example while they were backing up behind them), then this amount would not be deductible.
Luckily there is an exception. When you hire someone to move your vehicle and do so on a regular basis, then this work qualifies as ordinary and necessary business transportation expenses. This means that if an employer has to pay out more cash than what was actually driven because he had to pay someone else to move your car for him, he cannot deduct any portion of this total from his income because he did not incur costs in carrying out the ordinary and necessary business activity involved in having him move it (which means that even if he couldn’t pay himself because he took a cut of his employees’ salaries on top their wages) should be deductible in order to compensate his employees who worked on top of his salary as well as his employees who worked separately from him – because this is actually what transportation expense deductions are used for.
This exception only applies where regular movement may otherwise be considered as business transportation expenses; in other words where there is both regular movement and some independent expenditure made by an employer on behalf of his employees in order for them to travel long distances each day.
What does this mean? Well, if you are moving a large volume of goods each day in order to deliver those goods at their destination faster than any other alternative delivery service provider can do so (and therefore qualify as having a large volume under this rule), then allocating part or all of that daily volume among a series of different transport providers might qualify as doing business transportation expenses – but only if those particular transport providers qualify under another
The most common form of bookkeeping for owner-operators in the 1099-Misc. Form, which is a tax document that details the earnings and expenses of business income. Many truck drivers are concerned with what the form can tell them about how much money they are making and how much they need to pay in taxes.
The confusion stems from the fact that the form has two separate parts: a short two-page form for all of your income, including wages and salaries; and a long four-page form for expenses.
The short form indicates how much you earned (embezzlement almost always results in a large tax bill). The long-form includes expenses such as rent, utilities, phone bills, car payments, insurance, gasoline, and insurance premiums. The only real purpose of this long-form is to put things on paper so you can keep track of them later on when you do some bookkeeping.
Other than figuring out whether you have income or expenses (which will be discussed in another post), what other information does this long-form provide? It’s true that it gives you an estimate of your taxes owed (which will be discussed in another post) but it also provides an estimate of your net profit (which was discussed earlier). So why does this matter? Well, even if your gross profit is not quite right (your expenses are too high) or if your net profit is not totally correct (your wages aren’t enough), knowing what percentage of your gross profit is actually yours can help you avoid reporting any portion as being part of someone else’s business income.
The most common mistake made by truck drivers is not taking advantage of this information on their 1099-Misc. If you know how much tax you are paying every year on each business expense item on the 1099-Misc., then you can use this data to set up a proper budget for yourself and make sure your taxes are being paid correctly each year. Be careful though! There are still many other things that aren’t listed on this 1099-Misc.: fees from leasing companies like LeasePlanner; mileage deductions; fuel surcharges; insurances; license plates; vehicle maintenance costs; etc., etc., etc. This info might be useful if it helped you set up a budget or if it helps with spreadsheets but there really isn’t any value added here. I highly recommend reading my post “Taxes – A Quick Primer