One of the earliest and most devastating realizations we come to as adults is that paying taxes can be stupidly, unnecessarily hard. And that’s just income taxes! When you straddle the two roles of trucking business owner and truck operator in the trucking industry, tax preparation gets a lot more complicated.
A truck owner/operator, classified as a person or business that owns and operates a truck, may be self-operated, or might work for a larger trucking company. Regardless, you’re responsible for maintaining your trucks, complying with safety regulations, and ensuring your trucks are properly loaded and secured for transport. Additionally, you may also be responsible for obtaining and maintaining necessary permits and licenses for these operations.
If you’re an owner/operator employed by a trucking company, you will generally not be responsible for filing your own taxes, but you may need to file a tax return if you’re eligible for certain credits or deductions. On the other hand, if you are self-employed, you will be responsible for filing your own taxes.
While determining whether or not you even need to file your own taxes is the first step, there are many more questions you must answer before the process is done, like which taxes you need to pay as both an owner and an operator, how to calculate all of these amounts, and what deductions you can take. That may sound like a lot, but we promise it’s doable once you get organized and educate yourself about the process. In this guide, you’ll find a simple explanation of everything you need to know for truck driver tax preparation.
The Types of Taxes Truckers Must Pay
As an owner/operator, you’re in a unique position in terms of the different taxes you must pay.
First, remember that trucking companies are still like any other business, and that means you must pay the same business taxes as everyone else. These include:
- Federal and state income taxes: Truck owner/operators who are sole proprietors or partners in a business might need to pay these.
- Self-employment taxes: Self-employed truck owner/operators (such as a sole proprietor or independent contractor), may need to pay self-employment taxes to cover Social Security and Medicaid.
- Property taxes: Any truck owner/operator who owns property, like a garage or storage facility, may need to pay taxes on that property.
- Sales and use taxes
There are also certain taxes unique to trucking companies, such as:
- Fuel taxes
- International Fuel Tax Agreement (IFTA) tax: Drivers that operate in multiple states may be required to pay IFTA taxes on the fuel they use. This tax is used to apportion fuel taxes among the states in which a trucking company operates.
- Heavy Vehicle Use Tax (HVUT): Truck drivers that operate vehicles with a gross vehicle weight of 55,000 pounds or more may be required to pay HVUT to the federal government. This tax is based on the number of miles driven a year, as well as the weight of the vehicle being driven.
- Federal Highway Use Tax (FHUT): Truck drivers that operate vehicles with a gross vehicle weight exceeding 55,000 pounds and use the federal highway system might be required to pay FHUT. While FHUT is specifically for vehicles that use federal highways, HVUT applies to all vehicles that meet the aforementioned weight requirement, regardless of whether or not the federal highway system is used.
Specific taxes that truck owner/operators are required to pay will depend on your specific business as well as the laws of the state you’re registered in, so it’s always wise to consult a tax professional or attorney to ensure that your business is in compliance with all relevant tax laws.
How to Calculate Taxes
For truck driver tax preparation, there are several factors that need to be considered when calculating taxes:
- Gross income: Drivers must report gross income, which is the total amount of money earned from all sources before any deductions are made. This includes revenue from hauling freight, and any other sources of income, like rental income from leasing equipment.
- Deductions: Deductions can be claimed for business-related expenses like the cost of fuel, maintenance and repairs. Deductions may also be applied to other business expenses, such as rent, salaries, and insurance. More on deductions later.
- Tax rate: The tax rate that must be paid will depend on gross income and the tax laws in the jurisdiction out of which the business operates. Federal and state income tax rates are generally progressive, meaning that the tax rate increases as income does.
- Tax credits: Truckers may be able to claim credits for certain activities, such as hiring employees eligible for the Work Opportunity Tax Credit, or for making energy-efficient vehicle improvements.
Important Deductions to Take
When claiming deductions, truckers must be able to provide documentation of relevant expenses and show that those expenses were incurred in the ordinary course of business. Business-related expenses that truck drivers may be able to claim for deductions include things like fuel, maintenance and repairs, and insurance.
Truck owner/operators may also be able to claim a depreciation deduction for the cost of your vehicles. You may also be able to claim a home office deduction for related expenses if you use any part of your home exclusively for business-related purposes. Other business expenses to which deductions may be applied include retirement fund contributions, business travel, permits and licensing, accounting, DOT costs, interest paid on business loans, and equipment used for protection or for communication, such as steel toed boots or CB radios.
As you can see, the list of possible deductions you can claim can get quite longt! Again, when diving into the deep waters of truck driver tax preparation, you might want to consult with a professional or attorney to ensure that you claim all the deductions you’re entitled to. And remember, there are certain things that aren’t deductible, like commuting costs and deadhead miles, downtime expenses, regular clothing, and any personal expenses.
Ways to Save
When preparing for tax season, you don’t want to make the process any more difficult or time-consuming than it already is. Make your life easier by keeping receipts for all business-related expenses; you can’t deduct expenses if you don’t have a record of them! Likewise, maintain a detailed expense log to track business costs, including costs that are billed automatically, like scale tickets and tolls, and try to keep a credit card specifically for business expenses.
If possible, invest in a retirement fund. Besides providing security for later years, most contributions to an IRA, SEP, or 401(k) remain tax-exempt until you begin withdrawing them. Another thing you can do in advance is purchase necessary supplies—think prepaid tires or insurance, or office supplies—at the end of the year. If you’re concerned about a large tax burden in the coming year, spending some money on business essentials ahead of time can lower your tax bracket in preparation for the year ahead.
No matter what, always be prepared for an audit. An estimated 4% of tax returns filed by self-employed people with over $100,000 in revenue get flagged for review. With that in mind, always keep good records and stay in-the-know regarding your finances! Having thorough documentation and a comprehensive view of your own income and cash flow will help maximize profits, minimize taxes, and safeguard against painful IRS audits.
Check Filing Your HVUT Off Your List
Hopefully these tips will help simplify truck driver tax preparation, but do you want to simplify the process even further? File 2290 and pay HUVT, the Heavy Vehicle Use Tax, with i2290. Just create an account with i2290, answer some questions about your business, and you’ll receive an IRS-stamped Schule 1 in minutes. i2290 also lets you keep your tax documents readily accessible and available for you online when you need them, and if you run into trouble at any point in the process, our dedicated support team will readily offer assistance.
Ready for an easier, faster, approach to truck driver tax preparation! Create an account with i2290 today!
