Most people think about taxes in April, but as an owner-operator, you should be thinking about your taxes every month.
Your tax obligations include federal and state income taxes. As an
owner-operator, you’ll be required to pay estimated taxes each quarter,
and you are responsible for setting aside funds.
“We see almost every day a new owner-operator who hasn’t set
up automatic withholding, and all of a sudden at tax time they owe
You’re also responsible for self-employment tax based on net
earnings. If you have a second truck and employ a driver, you’re
responsible 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 weighing 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 according to the
Internal Revenue Service.
“We tell our clients to supply us with everything except restaurant
and grocery store receipts,” says David Blair, owner of Blair Tax
Consulting. “Everything they do on the road is deductible.”
Keep every receipt or bill for tolls, cell phone use, showers, truck
supplies 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 settlement 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
itemized 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 exceptions. 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 Florida 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
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 deductible, Bridges says. If you maintain a home
office, its expenses, supplies and related costs, such as a computer and
printer, are deductible.
Bridges advises using an accounting professional who knows the
trucking industry. Contact that individual when you’re planning a major
business transaction like disposing of your truck. “If you’re selling 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
- Cab curtains
- Coffee maker
- Duct tape
- First-aid supplies
- Floor mats
- GPS device
- Hard hat
- Ice scraper
- Lawn chairs
- Map lamp
- Power cord
- Seat covers
- Tire gauges
- Trash bags
- Truck magazines
- Vacuum cleaner