With March’s midpoint come and gone, tax season has officially reached crunch time; let the madness begin. For many Americans, doing taxes is as simple as copying numbers from a W-2 to a 1040 and waiting for a check. However, for the rest of the country this time of year can be very stressful, and maximizing write-offs and tax-breaks can be the difference between make and break. This is especially true for small business owners and independent truckers in particular. While it may be easier to head to the local H&R Block to take care of the confusing elements of filing, we thought that a brief introduction to the process could spare some out there from the hefty preparation fees. If you are a tax payer in America, your filing status can be classified in one of three ways: you are employed by a company, by yourself or both. This article concerns those who fall into the latter two categories.
For truckers filing as self-employed, LLC or otherwise, you must use a 1040 rather than the 1040EZ. With the 1040 you should also file a Schedule C or a Schedule CEZ, which are used to report the results of your business to the IRS. You are only eligible to use the Schedule CEZ if your business meets the requirements listed at the top of the schedule. Since most truckers are claiming depreciation on their truck, you are likely not eligible for Schedule CEZ.
You must then use the standard Schedule C. The Schedule C is divided into five sections, with Part 1 being income and Part 2 deductions. The income section can be completed by simply entering your total receipts on line 1, as long as you don’t have any inventory.
A major step toward winning on the tax return is to identify everything that can be written off as a business expense, and Part 2 of the Schedule C is where this comes into play. Everything from vehicle costs, travel, advertising, insurance and meals can be tax deductible. There is even an “other expenses” category for any other business-related expense that’s not listed on lines 8-27 of the Schedule C. Keeping documentation of these expenses and deducting them on the tax return is essential. The list of deductions with the corresponding Schedule C line number are below:
9-Car and truck expenses
10-Commissions and fees
13-Depreciation and Section 179 deduction
14-Employee benefit programs
17-Legal and professional services
19-Pension and profit-sharing plans
20-Rent or lease
21-Repairs and maintenance
23-Taxes and licenses
24b-Meals and entertainment
26-Wages (if you have employees)
30-Home Office Deduction
There are certain deductions that can get a bit tricky, which we have underlined, so it is very important to be especially careful when dealing with them.
- If you plan on taking a deduction for vehicle depreciation you must also file a form 4562 and be sure to read the instructions carefully.
- Lodging and transportation can only be deducted if the trip was 100% for business travel.
- You can deduct 80% of your eligible business meals and entertainment.
- The home office deduction is also dangerous, so be sure to do adequate researchbefore completing your return.
Because of the numerous opportunities for write-offs, being self-employed has many tax advantages. The problem is that, because of these advantages, self-employed tax-payers are much more likely to be carefully scrutinized by Uncle Sam when it’s time to pay the piper. For this reason it is essential to know what can be deducted and have the documentation to back it up.
We at uShip are not tax professionals, and in writing this we hope only to provide a brief introduction to the filing process for those who are filing as self-employed for the first time. It is your responsibility to make sure your return is completed correctly, so please consult a professional if you are confused.