Many Happier Returns
In tax season, owner-operator John E. Smith of Jackson, Neb., has even more reason than usual to love his mother.
“I was lucky,” Smith says. “My mother is a CPA, and I grew up learning about taxes and deductions. But most owner-operators haven’t a clue about taxes.” For them, “A good accountant with a lot of expertise in the trucking industry is an absolute must,” Smith says.
Harold Ohrberg of Silvis, Ill., an owner-operator for only a year and a half, says that’s the second tax lesson he learned. “Last year I used a local guy who does taxes, but he wasn’t a CPA and didn’t know a lot about trucking,” Ohrberg says. “I think I could have done better.”
His first tax lesson? “Save all receipts for everything,” Ohrberg says. “Even if you think it’s not deductible, it might be.”
There may be no such thing as a happy taxpayer, certainly not among owner-operators. But becoming a savvy taxpayer is relatively easy. By keeping in mind a few basic tips all year, you can save time, trouble, money – and maybe even your sanity – during tax season.
Things that cut your tax bill fall into three categories:
- Adjustments reduce your gross earnings, giving you adjusted gross income. For example, you can subtract from your gross earnings any contributions to a medical savings account or to a retirement plan.
- Deductions show the taxman that you invested income back into your business. The savings aren’t dollar for dollar, but they mount up. For example, if you’re in the 15 percent tax bracket, every $100 in deductions cuts $15 off your tax bill.
- Credits come straight off your tax bill. If figuring your adjustments and deductions leaves you with a tax bill of $5,000, and you have $2,000 in credits, you owe $3,000. These include tuition credits, earned-income credits and a fuel-tax credit for fuel not used for driving – reefer fuel, for example.
DEDUCTIONS: USE THEM OR LOSE THEM
Deduct every possible business-related expense, says Tom Sonricker of Transport Business Solutions in Kernersville, N.C. “Once you don’t take it, it’s gone.”
On the other hand, don’t buy an accessory or service you don’t really need just because it’s deductible. Remember, you’ll get only a fraction of your money back in taxes.
Be careful not to claim personal expenses as business expenses. If you’re driving the pickup to a meeting with your dispatcher, that mileage is deductible; if you’re loading the kids and heading to Disney World, that mileage is not.
With some expenses not so easily divided – the power bills at your home office, for example – formulas exist for calculating the deductible total. And there are gray areas that depend “upon the aggressiveness of the individual and the preparer,” Sonricker says.