For owner-operators, the beginning of a new year is more than a time to celebrate. It’s a time to start thinking about taxes. Even though the IRS says you don’t have to complete them until the April deadline, now’s the time to take action. Doing so can save you money—and also prevent headaches later on.
Trucker tax relief: Make tax deductions a top priority
while what can and can’t be counted as legitimate business expenses can be difficult to discern, here are some common deductions available to truckers who own and operate their own vehicle:
• Fuel. Typically a driver’s largest expense, fuel can also be your largest deduction, sometimes resulting in thousands of dollars in tax savings each year.
• Tolls and other fees. Road and bridge tolls you are required to pay along your routes are tax deductible, as are scale fees, licensing fees, parking and other expenses required to operate. However, you can’t deduct traffic tickets or any attorney fees you pay to fight such tickets. Many owner-operators have tried, only to be told by the IRS to pay up. In some cases, the IRS may even assess fees and penalties.
• Repairs, maintenance and supplies. Vehicle repairs, parts and maintenance are tax deductible, as are miscellaneous supplies such as window cleaner, paper towels, air freshener, maps, pens, log books and other items you buy specifically to use in your vehicle. However, keep in mind that not all expenses may be considered legitimate by the IRS.
• Mobile phones and computers. Cell phones, smart phones, laptops and tablet computers have become driver necessities. While the IRS doesn’t require you to make a choice, it does limit the amount of your deduction: because the government is of the opinion that these items are used for personal reasons as well, you can only deduct half of their cost.
• Depreciation. If you’re like most owner-operators, you can depreciate the value of your tractor and trailer over the course of several years. The amount you can depreciate each year depends on how much you paid for the equipment. You can also deduct the interest you pay on the equipment. However, keep in mind that when you sell the equipment, you must count the money you receive as income because you have already received a tax deduction for the depreciation.
• Meals and daily living expenses. What you eat and drink on the road is an important tax deduction, and you don’t even need to save your receipts because the government gives you a per diem rate. All you have to do is take the number of days you spend on the road and multiply by the per diem rate. Showers and other daily living expenses incurred while on the road may also be deducted.
• Retirement contributions. Another great way to save on your taxes is by setting up a tax-free retirement account. Each comes with different requirements and are more tax advantageous than regular IRAs because they allow for larger contributions. They can easily be set up at your bank or at a brokerage house.
Because tax laws are complex and deductions change annually, it’s a good idea to keep a track on all the IRS updates to ensure compliancy, accuracy and certainty that all opportunities to reduce tax liability are considered.
What if you need more time to pay your taxes? If the amount you owe is low enough that you won’t be subject to the failure to pay penalty, then file an extension by April 17 and pay the remaining balance due when you submit your tax forms prior to Oct. 15.
To file a Tax extension online on or before April 17 2012 reach @ www.extensiontax.com.
Taxexcise.com is committed to provide the Best in Quality and Service for all our users, www.Tax2290.com / www.TaxExcise.com is a certified, IRS authorized, e-file service provider for Form 2290.Tax2290 is a product of ThinkTrade Inc and a part of TaxExcise.com.
We are a BBB accredited company with A+ certification.