Originally posted: http://fastertruck.com/pages/owner-operator-tax-deductions.html
The Tax Man Cometh: What to Expect as an Owner Operator
For most owner operators out there, filing taxes for the year comes as second nature since they deal with the tax man each and every year. While not the case for every owner operator, most feel as though they have been around long enough to know the ins and outs of their tax bill. However, when you take into account the fact that tax law is one of the most diverse topics, usually changing each year, it doesn’t come as a surprise that some owner operators miss a few things. Because owner operators hold a quite unique position in terms of tax stipulations, it would not hurt to do a little research so you don’t upset the IRS when the tax man comes knocking.
An owner operator is subjected to a different set of tax deductions than, say, the average company employee or company driver; which is the first thing an owner operator needs to keep in mind.
This is where most owner operators run into trouble, especially those who are new to the business. Generally, when working for a trucking company, whether you are a company driver or an owner operator, one will receive one of two tax forms—either a W-2 or 1099—at the end of the year. In most cases, if you are a company employee then you will receive a W-2, which simply means that when you receive your paycheck for the pay period, the necessary taxes have already been deducted. An independent contractor—which most owner operators are classified as—will typically receive a 1099 form which means that they are personally responsible for paying their own taxes.
Most seasoned owner ops are quite familiar with the term “Schedule C,” since it is the form that they need to file in order to report all the income earned on the 1099 tax form;
any other income earned from truck driving is also reported on the Schedule C form as well. When it comes to filing taxes, most folks view the process as daunting, so filling out any extra paperwork is going to seem grueling. However, filing a Schedule C tax form offers a distinct advantage in regards to the fact that it allows owner ops to deduct expenses right down to the dollar. Of course, regular employees can do this too, but the nice folks over at the IRS certainly do not make it the easiest of tasks.
So the big question that you as an owner op might have now is just what exactly can you deduct from your tax bill.
The answer to that question can be summed up with three words—work-related expenses. The beauty behind being able to deduct work-related expenses is that a truck driver’s job is almost exclusively made up of work related expenses. Everything from routine maintenance to the bottle of glass cleaner you purchased to clean the bugs off of your windshield can be deducted in most cases. With that being said, when you realize that something as simple as glass cleaner can be deducted, it should come as no surprise that most truck drivers end up missing a substantial amount of deductions on their tax returns.
To fully understand the vast amount of items that qualify as deductions, you must do your own research as there literally hundreds of items.
Most truckers realize the obvious deductions, such as tools and the more costly expenses. However, in that same respect, most truckers simply look over the fact that they just bought new curtains for the cab, the new log book, or the DOT Physical Exam all of which can be deducted. The value of a receipt has never been more important since any expense related to your job as an owner operator is now a factor on your tax return.
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