Here are four of the most important tips to help truckers manage taxes and avoid making common mistakes.
1. Review Current Deductions
Deductions are a big deal for truckers – in part because there are so many of them, and many truckers don’t realize how much money they can save. Home offices, local travel, supplies, and communication equipment can all be deducted. You may even be able to deduct anything from drug testing fees to Visine eye drops. The possible deductions are so numerous you might want to check out this list of 114 ways to save on tax deductions. Collecting receipts and logging travel definitely seem less time-consuming and cumbersome when you consider how much money you can get back on your tax return.
2. Determine Your Business Type
Believe it or not, this is an important question because trucking is a flexible industry and the business can take on many forms. Each one is taxed differently. So what kind of business do you work for? Are you an employee of a company or do you work for yourself? Is the business registered as an LLC, a sole proprietorship, a partnership, or something else? Answering these questions may come easy for those who work for large trucking companies that provide clear-cut definitions and rules for their employees to follow when filing. But for smaller companies or business owners, the distinctions can become tricky. Consulting a CPA can help truckers understand their business type and how it relates to tax responsibilities.
3. Manage Your Estimated Taxes
Truckers often pay estimated taxes in portions throughout the year. Typically, estimated taxes are divided into quarters, but they can be paid more frequently. Paying the right amount of estimated taxes based on your income is important in order to avoid penalties.
The best way to manage estimated taxes is to tie them directly to your budget. If you set a budget every month, pay taxes every month. If you set a budget every three months, pay taxes at the end of that third month. Always pay at the end of your budgeting period. This accomplishes a couple of things. First, it binds your estimates to your actual income, which increases their accuracy. You can get refunds if you overshoot the mark. Second, it helps you set aside a portion of your budget for estimated taxes so you always have the cash on hand.
4. Keep Accurate Records
Update your data management system and be sure to save hard copies of your receipts and other important financial information. Today’s technology helps simplify the process. Lost cost, simple apps from Tailwind, Axon, and even Verizon make it easier to log travel details, calculate fuel, and scan and manage receipts from dispatch, customers, vendors, and more – including calculations for commissions. If you work for a large trucking company, it probably has its own preferences when it comes to this software. If you have a choice, pick the latest software.
Don’t let business taxes overwhelm you this year. Use these 4 tips and tools to help guide you and maximize your tax return.
eCapital understands the cash flow demands you face and gets you the immediate funds you need for your transportation business. No matter if you have 1 truck or 100, we can get you quick cash you need to:
- Expand your fleet
- Hire more drivers
- Pay for fuel and operating expenses
It’s simple, fast, and free to get started. Why not get a free, no-obligation quote?
Contact eCapital today to get started!
Call760-456-3786 or fill out the form.