From Taxes to Budgets: An Accounting Blog

Posted on: 25 November 2020

Filing taxes is always more complicated for self-employed individuals, and navigating complex tax forms can be particularly difficult for owner-operator truckers. Truckers who operate their own businesses and vehicles can take advantage of unique allowances and write-offs, but they are also responsible for operating permits, heavy vehicle taxes, and other, potentially expensive tax obligations.

Failing to keep on top of these various nuances can leave owner-operator truckers with crippling tax bills. Taking a number of simple steps will help most owner-operators keep their taxes under control. If you are an owner-operator interested in minimizing the amount you pay in tax, keep the following basic guidelines in mind.

Keep Track Of Deductible Expenses

Deductions are a formidable tool in any owner-operator's tax arsenal, and owner-operators can take advantage of deduction programs that aren't available to contracted truckers. For example, while employed truckers can deduct the transportation industry's general meal allowance from their on-the-road food expenses, owner-operators can deduct 80% of their actual meal expenses.

Keeping records of your deductible expenses is particularly vital if you have recently purchased your truck or have added new trucks to your fleet. The IRS allows you to deduct the cost of purchasing or financing your new truck from your bills for three to five years, depending on the type of vehicle. You can also deduct losses incurred due to vehicle depreciation, which can rapidly reduce the actual value of a heavily-used truck.

Because owner-operators are responsible for their own record-keeping, and cannot use many of the standard allowances offered to employed truckers, it is important to keep receipts for any purchases or expenses that may be deductible. Attempting to claim deductions without physical evidence can lead to unwanted attention from the IRS.

Take Care Of Subcontractors 

If you employ any subcontractors as temporary replacement drivers, mechanics, or general laborers, any payments they receive from you must also be reported correctly and on time. This makes you responsible for providing them with the required tax forms; long-term employees must be provided with W2 forms in most circumstances, while contractors will need a 1099-MISC form.

You can prepare these forms yourself by reporting the wages paid to your subcontractors to the IRS. These wages must be reported well before the annual tax deadline, so you have enough time to receive the forms and give them to your employee(s). You must also files copies of these tax forms with your own yearly or quarterly tax returns.

Use Professional Tax Preparation Services

Juggling your various tax responsibilities while also working long hours on the road can be a daunting task for any owner-operator. Hiring a professional tax preparation service to monitor your taxable expenses and deductions will make the process a lot easier and will prevent any basic filing mistakes that may lead to auditing.

Owner-operator truckers should always engage tax preparation services that employ Enrolled Agents and Certified Public Accountants. These highly trained individuals have unlimited representation rights. This allows them to legally represent you if your owner-operator business is audited or if you need to file an appeal against a previous judgement.

For more information on tax prep, contact a local accountant.