It is tax season! The time when owner operators either breathe easy because they know they have all their documentation ready, or the time when they panic because they weren't as organized in 2016 as they meant to be. If you regularly dread tax time, we have some tips for you; and we went straight to the experts!
Tara Thompson is a local tax preparer who works with a lot of owner operators and knows the ins and outs of tax code. We asked Tara to give us five quick tips to help owner operators plan ahead. Here are her tips for owner operator taxes.
1. Save your OWN electronic logs!
Most companies are required to keep less than 6 months of records for the DOT, but the IRS requires your logs as proof of your per diem deduction (IRS Pub. 463).
2. Don't underestimate your owner operator taxes.
For a quick, easy estimate on how to save for taxes, take 30% of your net settlement. When you’re self-employed, you have to pay your normal federal income tax (minimum of 15%) plus your self-employed taxes of 15.3%.
3. Make estimated payments monthly!
It’s always easier to come up with a smaller amount, so many owner operators find it easier to make monthly estimated payments instead of quarterly. Just make sure to keep records of your payments so your tax preparer can include these payments on your tax return. You can even submit them online.
4. Know the effects of leasing vs. purchasing.
Overall, you get the same deduction, but timing can make a big difference on your taxes. When you lease, you deduct the whole amount of your payment; when you purchase, you can choose your schedule for the deduction, so you may end up with a larger deduction your first year, and smaller in your third year, etc. Your tax preparer can provide you with more information about your specific situation and help you plan ahead.
5. Find a tax preparer familiar with the industry.
As with all industries, trucking companies have special deductions they can take. Just make sure both you and your tax preparer know what they are! This is one area that it just does not pay to do yourself. Consider the investment you make in your tax preparer an investment in your future; because it will ultimately save you money in deductions and lowered payments. The best way to find a good tax preparer is through word of mouth. Ask fellow owner operators who they use for their taxes, and who they don't use.
If you're looking for a trucking company that truly cares about their drivers and owner operators? Click below to learn more about K&J Trucking.
