Truck drivers are in a league all their own when it comes tax time. First of all there are several types of truck drivers in the view of the IRS. Youíve got LTL truckers who are home every night, while other drivers practically live out of their tractor trailer. Some truckers work for trucking companies, while others are owner-operators. Then you have truck drivers who file as an employee, as other drivers receive a 1099 for their wages. As a result, figuring out how to file what on taxes as a truck driver is a mystery for many. Hereís a guide to tax time as a trucker.
Determining Your Filing Status
Your first move is to determine how you are going to file. Truckers who work for someone else and receive a W-2 in time for tax season are employees. Truckers who are working for someone, but receiving a 1099 at tax time, are considered self-employed. An owner-operator is also self-employed. The big differences between filing as an employee and self-employed is tax withholding. If you have completed a W-4 for your employer, then you are going to have taxes taken out accordingly. Come tax time you should have paid enough to the IRS throughout the year so that you wonít have to pay any taxes.
Filing as Self-Employed
If you are filing as self-employed, prepare to pay taxes quarterly. This saves you from getting a penalty by the IRS for underpayment. Additionally, it helps you to pay throughout the year so you arenít caught in the red by April 15. To file quarterly:
- You must anticipate paying at least $1,000 in taxes after deductions
- You need to complete Form 941
- Determine how much you will need to send in each quarter, which falls on the 12th of March, June, September and December
- Print off payment vouchers 941-V and have them with you on the road in your rig so you are prepared to send off your payments each quarter
One consideration: you have been working for a trucking company, but you have switched jobs during the year so you are now considered self-employed. Depending on how much money you expect to earn during the remainder of the year, you will want to fill out a Form 1040-ES. This form helps you figure out a good estimate of how much you will owe in taxes based on your expected income and deductions. Speaking of deductions, letís see what kind of deductions are out there for truck drivers.
Who Gets a Deduction?
Deductions reduce the amount of your income that is taxed, which means the more deductions you have, the less you will have to owe the government. Deductions run in two routes: standard and itemized. The standard deduction is based on your filing status, number of dependents, and gross income amount. †You can figure out what your standard deduction will be using a calculator from the IRS†. Now, for the fun stuff. Itemized deductions are where you have a chance to reduce your taxable income. As a truck driver you could take quite a number of itemized deductions, depending on your employee status:
- If you are a driver who is home every night and you have a set lunch period each work shift, then you are not considered a truck driver in terms of itemized tax deductions.
- If you are filing as an employee, i.e. you work for a trucking company and receive a W-2, then you will file itemized deductions using a Schedule A.
- If you consider yourself self-employed in terms of filing status, you are going to file a Schedule C, i.e. Profit or Loss from Business.
Deductions you can consider claiming as a truck driver include:
- Travel expenses including accommodations and laundry while working over the road
- Meal allowances are governed by the standard meal allowance; consider listing your food purchases in the truck rather than fast food or restaurant meals
- Vehicle expenses: everything associated with costs of driving your rig, which includes tolls, parking fees, repairs, maintenance, and supplies, such as tie-down straps, floor mats, bungee cords, light bulbs, jumper cables, oil changes, inspections, tune-ups, fuel, chains
- Standard mileage rates, i.e. in 2014 the standard mileage rate for using your vehicle for business was 56 cents a mile
- Excise and flat-rate occupational taxes, i.e. heavy highway vehicle use tax
- Regulatory fees
- CDLs or other licenses needed to do your job
- Liability insurance coverage
- Medical exams required for truck drivers including DOT physicals, sleep apnea testing and drug tests
- Dues to a union or trade associations
- Truck driving publicationsí subscriptions
- Personal care products you need to maintain good hygiene on the road: showers at truck stops, grooming products, pillows, bedding, towels, shaving supplies, toilet/face tissues, sleeping bags, laundry detergent and fabric softener, and hand cleaning products
- Work clothing and/or uniform upkeep in the instance that you are required to wear a certain type of clothing or a uniform for your job, and if these clothes are not wearable when off the job
- Protective gear including work gloves, safety goggles, steel toed boots, hard hats, sunglasses, and face masks
- Cleaning supplies: paper towels, RainX, window cleaner, wheel cleaner, whisk brooms and dusting cloths
- Depreciation of electronics, such as a laptop computer, tablet, printer, smartphone or scanner, that is required by your job or employer
- Office supplies including logbooks, pencils, pens, notepads, envelopes and staples
- Necessities required to connect with your employer, such as Internet access charges, fax charges, cellphone charges, and long distance charges
- In-truck entertainment including satellite radio services and DVDs
- Business administrative fees: ATM and check reorder fees
As you can see there are plenty of opportunities to deduct expenses as an over the road truck driver. However, you should be cautious when taking as many itemized deductions as possible. Here are some tips to keep you out of audit territory with the IRS:
- You cannot claim expenses that you were reimbursed for by your employer; these are no longer your expenses to claim and will be claimed by your boss
- Avoid claiming any costs that are super excessive or outrageous, as the IRS requires all expenses to be necessary and ordinary. In other words, if you want to upgrade to the most expense computer on the market thinking you will receive a deduction in the process, you must be able to validate why you had to choose the most costly option. Expenses have to be appropriate and deemed helpful to you as a truck driver.
- Keep every single receipt for every single expense you plan to claim; use a boot box and store these with you in your truck for easy access after each deductible purchase is made
- If you file an itemized deduction, then you wonít be able to take your standard deduction. Save yourself a lot of trouble with figuring out expenses by calculating your standard deduction. If you do not think you will have anywhere near that amount in expenses in the upcoming year, then forget trying to keep up with your expenses. Youíll save yourself a great deal of hassle in terms of managing your expense receipts throughout the next 12 months if your standard deduction is larger.
Taxes can be a huge burden for anyone, but truck drivers seem to get the short end of the stick. After all, you are out on the road where your work environment varies greatly from the average 9 to 5 employee. As such, your taxable expenses can be both a beast and a burden for you, if you are trying to make the most of your adjusted gross income for tax payments.
When to Ask for Tax Help
The ideal solution for any truck driver who is filing a Schedule A or Schedule C, and especially if you are an owner operator, is to hire an accountant. Do your research to find the most reputable accountant in your part of the trucking world. Also, make sure your would-be accountant has experience working with truck drivers who are considered self-employed. Having a skilled accountant on your trucking team can save you a great deal of stress, as well as money. However, you will still be responsible for keeping up with your income, expenses and proof of both. Work to stay organized while on the road by devising a tax system that helps you keep up with taxing tasks throughout the year. If you are computer savvy, some of the recommended bookkeeping programs include:
- Axon Trucking Software
- Microsoft Dynamics AX
- Melton Technologies Horizon Trucking Software
The goal is to create a system that makes tracking your trucking costs and income easier for the long haul. Software can help you reduce human error, while making it easier for you to send your tax information into your accountant quarterly or at the end of the year. Best of all, you can deduct the cost of hiring an accountant and the purchase of bookkeeping software as necessary expenses for your trucking business.