Here is a list of the most commonly asked tax questions we've received from owner-operators, and our answers.
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Q: How much should I set aside for business taxes?
A: It is recommended to set aside 25-28% of your weekly net income for quarterly taxes.
Q: I cannot get my taxes done on time. What should I do?
A: Let ATBS know as soon as possible. We will file a one-time 6 month extension for you. It is an extension to file not an extension to pay.
Q: Will I receive a tax refund?
A: This is very dependent on your individual situation, however, it’s not likely if you are an owner-operator. ATBS works hard to keep you as close to owing nothing as possible. Remember, if you are getting a refund, you have given the government an interest free loan.
Q: Will my tax preparer send me my 1099-NEC form?
A: No, your carrier will send you your 1099-NEC form. However, if you are a corporation, there is a possibility that you will not receive a 1099-NEC; advice with your carrier if that is the case.
Q: I did not pay my quarterly tax estimates this year. What is going to happen?
A: The IRS will charge underpayment penalties and interest for the tax not paid. At ATBS, our tax department will calculate that charge and include the penalties and interest on your year-end tax return.
Q: What tax forms do I need to complete for a contract laborer, (for example an employed team driver)?
A: If you have an employee, run them through payroll and issue them a W-2 at the end of the year. If you have a contractor laborer issue them a 1099-NEC.
Q. Do I need to file a separate tax return for owner-operator earnings and company driver earnings?
A: No. As a sole proprietor, you will file one return, Form 1040. The 1040 will contain a Schedule C, listing business earnings and expenses.
Per Diem Questions
Q: How does the Per Diem tax deduction work?
A: Per Diem is a tax deduction for meals and incidental expenses on the days you are working away from home. The current rate for 2024 (as of October 1, 2024) is 80% of $80 per full day, and ¾ of this amount for partial days. Partial days are the day you leave home and the day you return. Full days are any day you need to stop driving due to the hours of service rules or are unable to drive due to on-the-road repairs. Visiting family or friends for a few days does not count as Per Diem days. If you are using a motel/hotel while on the road, Per Diem is still deductible, but not during home time.
IMPORTANT NOTICE: The Per Diem rate from January 1, 2024 - September 30, 2024, was $69 per day in the Continental United States. This means you will need to calculate your total Per Diem deduction using two different Per Diem rates. You need to keep this in mind when you are filing your 2024 taxes.
Q: Can I use my e-log records to count the days for Per Diem?
A: You can if you have the full year of e-log records. Contact your carrier every 3-4 months and ask for a copy of your e-logs. Many carriers delete e-logs every six months; so do not wait until the end of the year to ask for a copy.
Read More: Seizing The Per Diem Tax Break
Family Related Questions
Q. Should I file my tax return separately from my spouse?
A. As a married taxpayer, you have two choices, Married Filing Jointly and Married Filing Separately. Generally, Married Filing Jointly will work out better for a taxpayer, but not always. ATBS can prepare the return both ways, and then provide you with them both to indicate the best tax outcome for you.
Q: Can I claim a parent as a dependent on my taxes?
A: To meet the support requirements necessary to claim your parent as a dependent on your tax return, you must cover more than half of your parent’s support costs – meaning 51% or more of their support costs must be covered by you. These costs include food, housing or lodging expenses, clothing, and medical services and/or equipment costs. To be a “Qualifying Relative” the person you’re caring for can be your parent, in-law, or grandparent.
Q: How much of my (or my spouse’s) Social Security income is taxable?
A: How much Social Security income is taxable depends on your total income and marital status.
If you file a federal tax return as an individual and your income is between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits. If your income is more than $34,000, or more than 44,000 for a married couple filing jointly, then up to 85 percent of your benefits may be taxable. If you are married and you file a joint return, and you and your spouse have a combined income that is between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits.
Q: Should I claim a dependent on my quarterly estimated taxes?
A: No, you should claim dependents only on your year-end tax return.
Deduction Questions
Q: Is fuel tax deductible for truck drivers?
A: Yes, fuel tax is a part of the cost of fuel, so it is deductible as an outgoing owner-operator fuel expense.
Q: Can I claim the home office deduction?
A: It is possible for an owner-operator to qualify for a home office deduction, however, you need to meet two tests:
The home office must be used regularly and must be used exclusively for the business, and;
The home office must be your principal place of business.
If you conduct business outside of your home such as being an over-the-road trucker but use an office space when you’re home to conduct business calls, organize receipts, and overall business functions then it’s possible to qualify for a home office deduction.
There has been conflicting information about what qualifies for a home office deduction but if you can prove the office is used exclusively for business then you should be entitled to the deduction. The IRS may challenge the validity of the deduction for a trucker since your truck is considered your primary place of business.
Q: Is clothing tax deductible?
A: Generally, gloves, steel-toed boots, etc. that are required as part of the job are deductible, but not general everyday clothing that everyone needs to buy.
Q: Is a gym membership tax deductible?
A: Yes, but only if the membership is prescribed by a doctor to treat a specific medical condition. You must also join the gym after the diagnosis.
Q: Are medical expenses deductible?
A: If medical expenses exceed 7.5% of your Adjusted Gross Income you can deduct the amount over 7.5%.
For example, if you have an adjusted gross income of $50,000 and $6,000 of medical expenses, you would multiply $50,000 by 0.075 (7.5 percent) to find that only expenses exceeding $3,750 can be deducted. This leaves you with a medical expense deduction of $2,250 (6,000 - 3,750).
Q: I purchased an Auxiliary Power Unit this year. Can I receive a tax credit for this purchase?
A: Yes. Send your tax preparer the receipt or the Bill of Sale for the APU. Also, write down the hours it was used or gallons of fuel used so we can provide the tax credit.
Q: Are truck dog expenses deductible?
A: Yes, if a dog is acting as a security for the truck it is considered a guard dog and its expenses (food, veterinary bills) can be deducted from your taxes.
Other Miscellaneous Questions
Q: If I sold a home this year, is the profit taxed?
A: It depends on how long you owned and lived in the home before the sale and how much profit you made. If you owned and lived in the place for two of the five years before the sale, then up to $250,000 of profit is tax-free. If you are married and file a joint return, the tax-free amount doubles to $500,000. The law lets you "exclude" an amount from your taxable income. (If you sold for a loss, though, you cannot take a deduction for that loss.)
Q: If I rented out a home this year, do I have to claim it on my taxes?
A: Yes, you will need to fill out a Schedule E form.
Q: What is the penalty for not having health insurance?
A: The insurance mandate has been removed. As of 2019, there is no longer a penalty for not having health insurance.
If you have any more questions, feel free to give us a call at 866-920-2827 or visit our website at www.atbs.com.
