We’ve all heard that common saying – you know, the one about that thing you can’t avoid. Yes, our old friend – taxes. The season is upon us where we either pay what is due or get back what is owed from our old friend, Uncle Sam. Many are confused this tax season as the tax reform act from 2017 is finally coming into play. Luckily, we have Jim O’Donnell, owner and CEO of Trucker Tax Service – the tax experts specializing in the transportation industry, here to help us out.
Let’s untangle this confusing tax web together, shall we?
1. Owner operators can stand to save anywhere from $2,000 to upwards of $7,000
The Tax Cuts and Jobs Act (TCJA) President Trump signed into law in 2017 is making major waves this tax season. So, what does that mean? Owner operators and small businesses in general stand to make huge savings when filing this April. Section 199A in the new tax reform, allows the qualified business income deduction to now reach 20% of net qualified business income which will be huge for small business owners.
According to O’Donnell, “The new tax law should put more money in every owner/lease operator driver’s pocket. Assuming they are grossing $150,000 and nets about $50,000 on his schedule C (the profit and loss statement) he will get a 20% break and only $40,000 of it will get taxed. He’s going to save about $10,000. That will be a big savings for the owner-operator, lease operator, or a small trucking company”. Ultimately, all of this all boils down to the more net earnings, (after all expenses) – the more breaks on your taxes. Drivers should keep daily logs of their expenses while on the road. If you don’t, you could be missing out on huge savings.
The takeaway: Small business owners should be able capitalize on the 20% tax break thanks to the new tax reform. Be sure to study up to see if you qualify for this huge tax break and keep track of your expenses in the meanwhile so you don’t miss out on any savings.
2. Not all tax professionals are created equal
Now, hear us out. While you may think you’re doing your due diligence to head down to your local box store to work with a tax professional, you could still be leaving money on the table. Why? While tax preparers may have a significant amount of general tax knowledge – they most likely don’t specialize solely in the trucking industry. Because of this, tax preparers are likely to play it safe when it comes to deductions. Instead, try working with a tax professional that specializes in the trucking industry who knows every little deduction that you can write off. This ultimately means a larger return and more money in the bank. “Non-industry tax preparers generally have very little volume of clients in trucking, so they usually do not invest the time and energy into learning about your industry” says O’Donnell. “Because of this, they often balk at filing the amount of expenses incurred for a truck driver in the last year as it seems excessive to them”.
The takeaway: When you have a tax return that is as complicated as an owner operator or driver with his own authority, you need the help and experience of an industry expert to ensure you’re putting yourself in the best position possible.
3. When in doubt – track, track, track!
Bookkeeping can be tedious and time consuming so it’s easy to let it fall by the wayside. But precise recording of expenses as you go can have a huge payoff come tax time. Let’s face it – are you really going to remember where you kept your receipts from that job you took 6 months ago? Do you really want to spend one of your precious days off searching for all your receipts from the last year, THEN capturing all of them? Not likely.
Even though it can be the last thing you want to do after a long day of work, spending 2 minutes a day keeping up with your bookkeeping is far more tolerable than putting in hours on end in a single day. Not to mention the frustration and fatigue that comes from trying to do a year’s worth of bookkeeping in a single day leads to inaccuracies that could cost you major dollars. Using apps like TAPApp makes bookkeeping on the go easy and best of all “drivers on TAPApp typically capture an additional $5.00 per day – which easily adds up to an additional $1,500 in expenses that can be deducted at tax time”, says O’Donnell. That’s a win if you ask us!
The takeaway: Track your expenses on a daily basis and utilize apps like TAPApp to score big during tax season.
Finally, prepare for tax season by partnering up with a factoring company like eCapital. We accelerate invoice payment to just 24 hours, so you’ll be prepared no matter what comes your way. Best of all, your factoring fees are tax deductible! Plus, we offer perks like free fuel cards and access to our exclusive broker network! Boost your business growth today, call us at 760.456.3786 or fill out the form for a free, no-obligation rate quote.