Newbies - Financial Considerations
Record Keeping and Taxes
As a professional driver, you have enough paperwork to worry about with logbooks, mileage reports and fuel receipts. What about the record keeping requirements for your personal expenses? What will you be able to deduct on your income tax return each year?
As a rule of thumb, anything you spend for your job will be tax deductible. Most company drivers don't have to pay for tolls, scale slips or truck washes, but if you do have to cover some of these items, you will be able to include them on your tax return.
The first thing to remember is that a good accountant is worth the cost. If you have a tax professional who understands the trucking industry, you will probably be able to save enough money on your income taxes with the proper deductions to pay for the accountant's fees.
As an employee, there are a number of things you should understand regarding your records. Make sure you keep all receipts and file them by category. Don't throw meal receipts in with your toll and scale receipts. The best way to keep track of these items is to note an envelope and place receipts inside, or staple them to a sheet of paper that lists each of the items along with the totals. Then, once a month, add up the expenses and at the end of the year you will be able to complete your tax return more efficiently.
The Internal Revenue Service allows a number of deductions from your total income and these can be substantial. If you are married, you and your spouse can subtract $7350 for your standard deduction (or more if you itemize) and $2800 for each person in your family. In addition to that, you will be able to take a tax credit of $500 for each of your children. Single taxpayers, you can deduct $4400 from your income and $2800 for your filing exemption.
Company drivers will report expenses on IRS Form 2106. The largest portion of that will be your meal deductions. You can claim your meals in a number of ways. If you want to save every receipt, or make a note of your meal expenses on your logbook (called a contemporaneous record), you can claim your actual costs. For most drivers, they take the "per diem" allowance, which the IRS has provided. For the year 2000, the per diem amount was $38 for travel within the US and $42 for international meals. The per diem costs are allowed at a rate of 60% for workers subject to DOT regulations, but this percentage is increasing each year. Make sure that you only claim your meal per diem for days in which you are away for 24 hours. If you leave at noon on Monday and return at noon Friday, you cannot claim both the day you left and the day you returned.
Other expenses you may be able to claim on your Form 2106 include mileage, but only if you are required to drive from one location to another in your personal vehicle. You cannot claim commuting miles to your truck from your home and vise versa. Also, if you use your personal vehicle to pick up parts for your employer, you can claim the standard mileage rate of 32.5 cents per mile. Be sure to keep good records--include the date, the odometer readings and the reason for the trip so you can verify the expense for your tax return.
If you wear a uniform for your carrier, you can deduct the cost of uniform rentals, purchases and cleaning if you pay for these yourself. You can also deduct footwear if you are required to wear special, protective shoes and do not wear them when you are not working.
Union members can deduct their union dues and if you subscribe to any job-related magazine, you can deduct the cost of the subscription. Don't forget to include the cost of your CDL and your physical exam if these were paid out of your pocket. Did you buy your own logbook, atlas, maps or cleaning supplies? Your CB radio and cooler for the truck are also business expenses. Even gifts you give customers might be tax deductible, but they are limited to $25 per recipient each year. Check with your accountant for this deduction, but if you qualify then you should claim that fruit basket you gave to the guy at the loading dock who gets your truck in line when you arrive at the gate.
You may also be able to deduct the costs related to attending a truck show, but there are strict guidelines to consider. Your room, mileage and meals are only deductible for yourself, not for your spouse or children, and the primary purpose of the trip must be business related. Check with your tax preparer before you attend a truck show and keep good records so you can substantiate the write-off with the IRS.
In order to claim any of these business expenses, you must keep the receipts or the proper documentation. When you are ready to see your accountant, all you will need to bring in is a written list of these items. Your tax preparer does not need to see the receipts, as you are accountable for the figures you provide to the professional. An accountant's nightmare is the truck driver who walks into the office with a year's worth of receipts in a shoebox and dumps them on his desk. Save yourself some money by presenting a neat list of deductible items and your tax preparer will thank you.
Remember, each person's situation is different, so make sure you discuss your record keeping requirements with your tax professional. The more knowledgeable you are about your taxes the more you will be able to deduct, and the more you will be able to spend on yourself.