Truck-driving is a vital industry to our economy. I have been a part of that industry for 24 years and know I will always be a part of it. I even maintain a Class A CDL. As such I am very familiar with the ins and outs of the trucking industry and its related tax issues.
Congress has designed numerous tax benefits designed specifically for truck drivers. However, I have always conceded that there is not nearly enough information available to truck drivers concerning taxes. So here, I plan to shed some light on the issue. To help truckers across the country, I have compiled the following information for Drivers, to give them/you a better idea of what could be important towards your taxes.
Trucking Tax Deductions
Keep Immaculate Records
Remember, records are the key to getting all the deductions you are entitled to and in the event of an audit are required to back up the deductions you claimed. Get receipts for everything when you are on the road and if no receipt is available make your own receipt for the expense. Keep your receipts together and record them somewhere, in a journal, a notebook or a computer so you can total them up at the end of the year. While an audit is never a “good” thing, as long as you have your financial information organized then you should not have anything to worry about. Throughout the year, keep your receipts and financial records together and safe in a box. When its time to get your taxes done, take the whole box in so that you have all the information you need for your preparer. I have my clients who are drivers bring them in or by as they are in town and I keep them safe for them.
People always seem to lose something; they should do accounting work themselves every month or deal with a bookkeeper to get this stuff done all year long. The income statement should be reviewed throughout the year. We can’t consult people when we see them once a year.
Track the little things
As an independent owner/operator you have the ability to claim a portion of your rent or mortgage as office space. You can also claim office expenses ranging from pencils to logbooks things you may pay cash for and forget about. Tools such as tire chains should also be claimed. Keep receipts for everything that’s work-related and to stay organized throughout the year, even if that means visiting your accountant on a regular basis.
The Standard Meal Allowance (per diem) is different for truckers than it is for other people. Taking the standard deduction relieves you of the responsibility of keeping records and receipts for all your meals, and most will find that the $36.00/day allowance will cover your actual expenses. There are special rules that apply to the meal deduction that you should also be aware of. If you get home, or pass by the house during the day you will have to pro-rate your deduction for that day.
you’re out on the road and decide to pass by the house to collect your mail and check out the homestead. You arrive home at 6:00 am and stay for 3 hours.
Divide the day up into 4, 6 hour periods (Note: IRS rules state you can use any period that you consistently apply and that is in accordance with reasonable business practice.), so you would have the following 4 periods in a day –
Midnight to 6 am
6 am to Noon
Noon to 6 pm
6 pm to Midnight
Since you arrived home at 6 am and stayed till 9 am you would be eligible for the standard deduction for the other 3 periods which is $27.00 ($36.00 times 75% -3/4-.75) for that day. If you arrived home at 10 am and stayed till 1 pm then you would be eligible for 2 periods or 50% of the daily deduction. This same system would also apply to days when you arrived home for a few days off or left home to go back out onto the road. In the event of an audit your log book would be used to validate your time at home and on the road, so hang on to those old log books. Keep a logbook with dates and amounts that you eat while on the road or it will be very difficult to come up with an accurate number.
According to the IRS, travel expenses are ordinary and necessary expenses that you pay while traveling away from home for your business or profession. An ordinary expense is one that is common and accepted in your field of business, trade or profession. A necessary expense is one that is helpful and appropriate to your business. An expense does not have to be indispensable to be considered necessary. However, you cannot deduct expenses to the extent they are lavish or extravagant.
Anything you spend on, in or around the truck would normally be considered a deduction.
Antennas, batteries (for the flashlight as well as the truck), binders, blankets, boots, briefcase, calculator, CB repairs, CB’s, cellular phone, chains, checking account fees (atm fees for the extra charge because you’re away from your home bank), chrome things, cleaning supplies, com check charges, coveralls, Federal Express (UPS, Postage for business mail or other mail which is necessary because of your absence from home), flashlights, gloves, hand tools, ice box, insurance, laundry, legal fees (not fines, but the cost for legal fees to defend yourself and court costs), lights, log books, luggage, lumpers, maps, motels, office supplies, pens, permits, pillows, radio, repairs, ropes & equipment, safety equipment, safety glasses, scales, scanner, sheets, showers, signs, smelly stuff, special clothes, special equipment, stapler, staples, stereo, storage, sun glasses, tarps, taxi, tires, tolls, tool boxes, truck organizations, truck parking, truck wash, truckers newspapers & magazines, TV, and uniforms.
This list is by no means all conclusive, but it should give you the idea. If you’re not sure about a particular item, check with the IRS or your accountant on it, especially if it’s a large expense. If you take an expense and it’s later ruled invalid you can be charged penalties for any additional tax now due from the time the tax would have originally been due. There are also a few other items worthy of more specific mention.
If you use lumpers and are not reimbursed by the company for the amount you pay the lumper, or are only reimbursed for part of the cost of the lumper you can deduct the amount you paid or the difference if you were partially reimbursed. Get a receipt from the lumper that includes his name, address, social security number, and the company at which you used his services, the date and the total amount you paid him. Make sure you get the information before he loads or unloads your trailer. If he won’t, chances are you don’t want him in your trailer at all.
If you drive a truck with a large gross weight (over 55,000 pounds) you will need to pay the federal highway use tax by August 31st every year. If you have not already purchased a truck with this weight, be aware that if you do, this tax will be due for the first time at the end of the month in which you make your truck purchase. After you have paid it for the first time, you can decide to pay it every year in August, or in quarterly payments to reduce the burden.
Luckily for truckers, most states appreciate your purchase of their fuel and will give you specific tax breaks. Therefore it is imperative that you keep good track of your mileage and your fuel purchases.
Hire a specialized accountant
That brother-in-law whose been filing your income tax for the last 10 years may be cheaper than an accounting firm that specializes in trucking, but does he really understand the ins and outs of the business? Chances are he doesn’t and chances are it’s costing you money.
Dealing with a specialized accountant that deals specifically with the trucking industry (spicifically drivers), allows you to maximize your claim and minimize the taxes you’re forking out each year. I think specialization means you should be getting a more knowledgeable tax return and more insight into expenses and how to handle them properly. A general accountant probably won’t get it all right, especially when it comes to things like meals. It’s important to sit down with an accountant who knows the trucking industry and discuss the intricacies of your business. An accountant who specializes in trucking will then be able to determine how you can maximize your claim.
If you have questions please let me know, With over 20 years in the trucking industry myself I will be clad to answer your questions. Contact me at L & R Tax Preparation.
© 2010 – 2011, Bruce McFarland. All rights reserved.