The fact is this: One of the most common mistakes a trucker can make is not filing their taxes. Sure, you’ve spent a long time on the road and you’ve finally gotten home and the last thing you want to think about is your taxes, but it’s important to remember that filing on time is more important than ever.
Consider that many states will arbitrarily step in and garnish wages if you haven’t filed and it’s not hard to see where not filing your taxes can be a serious problem. Many times, especially as an owner-operator, you can take advantage of specific tax breaks not available to you otherwise. Do you really want to leave that money on the table?
As you avoid filing your taxes, consider that penalties can weigh heavily on your business. Penalty interest can more than double or triple what you owe, which can be a serious problem whether your business is big or small.
When you owe the IRS money, they won’t rest in coming after you for it. When you’re operating at margins already squeezed to the edges, the last thing you need is a huge tax bill crippling your bottom line and cash flow.
If you wind up owing one year, you could see a small amount compound into a big amount before you have a chance to address it, especially if you are looking at multi-year filing lapses.
Consider the Refund
Do you really want to leave money sitting on the table? Consider that most fleet drivers wind up getting refunds since their per diem payments count against their expenses.
While truckers aren’t required to declare their per diems, they are allowed to itemize deductions against them. When you add up small deductions, they can mean big tax savings across the board.
If you aren’t saving small receipts and keeping a log of your expenses, then not doing your taxes, you are missing out on a huge refund, and turning money in your pocket into money owed to the IRS.
When every dollar you put down for a deduction comes back in approximately 20 cents on your refund, it isn’t hard to see how important these savings are. From expenses like batteries and air fresheners, there’s a lot of savings to be wrenched from your taxes through proper accounting.
Moving Into Another Tax Bracket
Proper itemizing can also move you into a lower tax bracket. If you can shave anywhere from $15,000 on up off your tax bill due to itemized deductions, you may go from 40 percent owed to 22 percent.
When you do the math, everything you spend your money on can be counted as job expenses. When you save your receipts, and keep track of said expenses, you are moving yourself into a far lower tax bracket.
But this is why it is so important to keep track of this information and properly log everything that you are doing while on the road. Considering many fleets are using E-logs, you can utilize this data to prove that you were on the road during a certain day.
Still, since most log information is deleted after six months, it becomes important to ensure you are keeping a full accounting of your activities so as not to miss out on potential tax savings.
In the end, remember that you won’t be able to maximize your tax savings if you aren’t even filing them to begin with. Make sure to stay on top of filing dates and hire an accountant if you have to and you’re sure to end up with more money in your pocket come tax time.