Truck drivers have an underappreciated job in America. Practically every consumer relies on truckers to deliver food and other products to their local stores each week. Additionally, truck drivers face unusual challenges when it comes to taxes.
Truck drivers are considered owner-operators of their enterprise. As a result, the IRS expects truckers to cover their taxes differently than traditional W-2 earners.
Here is your guide to trucker tax reporting for 2019.
Unique Challenges of Truck Driver Taxes
The biggest challenge to successfully and accurately completing your taxes for 2019 is understanding how you and your business is taxed. Planning and conducting consistent recordkeeping throughout the year will help make tax season easier for you.
Truck drivers are considered “owner-operators,” which means that you are responsible for your taxes. Truckers do not have their Social Security and Medicare, as well as other taxes, pulled from each paycheck from an employer.
Instead, truck drivers are like other self-employed individuals in that they must record, report, and calculate taxes on their own.
The IRS requires self-employed workers to pay estimated quarterly tax payments if they expect to owe at least $1,000 in federal income taxes. Failure to do so can result in fines and penalties from the tax agency.
Estimated tax payments are done at the end of each quarter in the year, often in the range of 20-30% of your net income received in the given quarter.
If you failed to cover quarterly payments throughout 2019, it may be too late for this tax year, however, you can always adapt and change your plan moving forward into 2020.
Types of Truck Driver Taxes
Truckers are required to cover A) self-employment taxes, B) federal income tax, and C) state income tax.
Self-employment taxes are similar to Social Security and Medicare automatically withdrawn from paychecks of traditional W-2 earners. Currently, the self-employment tax rate is 15.3 percent.
Meanwhile, federal income tax is calculated on your tax return. The same is true of state income tax that is owed.
Owner-operators like truck drivers are responsible for making quarterly tax estimates and payments to avoid penalties at the end of the year.
Tax Deductions for Truck Drivers
It is incredibly important that truck drivers take advantage of tax deductions considering the high rate of self-employment taxes.
Owner-operators often claim deductions like:
● Start-Up Costs
● Home Office Costs
● Business Supplies and Tools
● Travel Expenses like Mileage & Hotels
● Truck Lease Costs
● Permits and License Fees
● Truck Repairs & Accessories
● Insurance Premiums
● Retirement Plan Contributions
The above list is just a few examples of the many ways truck drivers can reduce their tax liability. Speaking with a tax professional can help you understand the many ways you can deduct business expenses related to your profession on a tax return.
Truck Driver Recordkeeping
Recordkeeping is extremely important when it comes to self-employed workers. The IRS can potentially conduct an audit, which is why you need receipts and other paperwork that validates the business expenses you claimed on a return.
All in all, the main criteria for determining whether an expense is deductible is whether or not you have a record of the expense as well as consider it a necessary business expense. Items that you will also use for personal or ordinary activities outside of work do not qualify as legitimate business expenses. Ultimately, honesty is the most important thing in avoiding an IRS audit.
Per diem expenses are some of the most significant challenges truck drivers face since they spend so much time on the road. Correctly reporting deductions related to travel meals, beverages, and overnight stays are important. You need to have a paper trail of all activities related to the business.
Contact Levy & Associates for More Assistance
Levy & Associates is a seasoned firm that has worked with countless owner-operators on their taxes. We can help you avoid common reporting pitfalls, take advantage of as many deductions as possible, and ultimately reduce your tax liability.
Contact us today at 800-TAX-LEVY, or visit www.levytaxhelp.com.