Knowing how to file your taxes as an owner-operator can be stressful, along with running a successful trucking business. Since you run your own business, you are now responsible for preparing your tax returns. Below we have complied common owner-operator tax questions and filing tips.
How to File Owner-Operator Taxes
Filing your taxes doesn’t have to be complicated. While it might be easier to hire a tax professional – you don’t have to. You can file your tax returns yourself, and it can be easy too. Follow these steps.
- Get a complete list of your income and expenses. Therefore, it is important to ensure you have all your receipts in one place.
- Report this on a Schedule C form to the IRS. Schedule C or Form 1040 is used to report income or loss from your business.
- Move this number to Form 1040. This form is the base tax form that all tax filers use when filing income taxes.
- Complete the Schedule SE form to determine your self-employment tax. You will need to include any earnings from self-employment.
- Add up the tax that you owe or if you will receive a refund. To do this, enter all income, credits, and deductions on Form 1040.
- Finally – file your taxes. To do this will determine how you completed the above steps. If you used paper to fill out Form 1040 – you will mail this to the IRS, and the processing time can take up to eight weeks. If you used a tax professional or software, you could file electronically, and the results can take approximately 20 days.
Common Owner-Operator Tax Questions
How much should be set aside for business taxes?
The recommended amount to set aside for quarterly business taxes is 25 – 28% of your weekly net income.
What will happen if I do not pay my quarterly taxes?
If you do not pay your quarterly taxes, the IRS will charge a penalty and interest.
What is a Per Diem tax deduction?
The Per Diem or “per day” is the largest tax deduction for an owner-operator. This deduction is for your meals and expenses when working away from home. The current rate is 80% of %66 per full day, and ¾ this amounts for half days. Half-day is when you leave home – but return later that day if you rent a motel while on the road. The Per Diem is still considered a deduction – just not during your home time.
Can I use an e-log record to count the days for Per Diem?
If you have the full year of e-log records, you can use them.
Can an owner-operator claim a home office as a deduction?
As an owner-operator, it is possible to claim your home office as a deduction – but you must meet these two requirements:
- Your home office must be used regularly and must be used solely for your business, and;
- The home office must be the principal place of your business.
If you handle business outside of your home – such as over the road, but still use the office space when home to make business calls, organize receipts. Overall business needs, you may still qualify to use this as a deduction.
Is fuel tax a deduction for owner-operators?
Fuel tax is part of a deduction for owner-operators since it is considered an expense.
Is clothing considered tax-deductible?
Typically, you can use gloves, steel-toed boots, etc., that are used to complete your job as a tax deduction. However, everyday clothing is not tax-deductible.
Can I deduct medical expenses?
If your medical expenses have gone over 7.5% of your Adjusted Gross Income – you may be eligible to deduct the amount over the 7.5%. An example would be – your adjusted gross income is $50,000, and $6,000 of that was medical bills – you would multiply $50,000 by 0.075 (7.5) to find that the expenses exceed $3,750 would qualify as a tax deduction. This will then leave you with a medical expense deduction of $2,250.
What is the penalty for not having health insurance as an owner-operator?
As of 2019, the insurance mandate has been removed. There is no longer a penalty for not carrying health insurance as an owner-operator.
General Tax Tips for Owner-Operators
When filing taxes, there are some tips that you can follow to make the process run smoothly and be less stressful.
- It is recommended that you make your estimated payments monthly instead of quarterly. It is often easier to come up with tax money monthly instead of quarterly.
- Keep all your receipts. You can keep a folder or box in your truck to put all your receipts in. Keeping your receipts will help make things easier at the end of the year when you figure out your tax deductions.
- You might consider hiring a tax professional. Tax professionals can help ensure you have everything filed correctly and on time. Filing on time and correctly may end up saving you more money. However, suppose you do not want to hire a tax professional. In that case, you can get tax preparation software to help you file your tax returns.
Tax season is often intimidating, especially to those who often owe taxes. As an owner-operator, you are considered self-employed, so you should pay taxes each quarter. This will help minimize stress at the end of the year. Tax season doesn’t have to be scary. Stay organized and prepared throughout the year, and your tax season will be a breeze. Don’t forget to file your taxes this year by April 22nd, 2022.