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Many drivers choose to do their own taxes or put their taxes in the hands of a preparer who is not familiar with the rules available to this industry.

Its tax time again!  These four words create the phrase that most Owner Operators dread to hear at the start of every new year.  It doesn’t have to be a task that weighs on you so heavily that it distracts you from performing your job.

Owner Operators have many more deductions and allowances available to them than most of the working men and women within the United States. Unfortunately, many drivers choose to do their own taxes or put their taxes in the hands of a preparer who is not familiar with the rules available to this industry.  We have put together the best “Tax Tips for Owner Operators” to help you receive the best tax breaks available today.

• Save your Receipts- Practically everything a driver purchases while on the road is tax deductible.  Everything from Air Freshener to WD-40 is tax deductible for the OTR driver. An itemized list of deductions will always produce much better results than if you take the standardized fee route.

• Per Diem- The IRS has increased the per diem for this year, meaning truckers can deduct more from their federal income taxes for each day’s expenses, including meals, tips, and showers. In 2008, the claim allowance increases to 80 percent. Logbooks are the only documentation required to claim the per diem; truckers do not need to keep receipts for meals and showers. However, if a trucker routinely spends more than $52 a day in meals and showers, he may want to save receipts and forgo the per diem

• Use a Professional- The right preparer, specializing in the trucking industry, can get you hundreds and possible thousands of dollars of additional deductions than if you attempted to file on your own.  A professional tax preparer will not only have several years of experience, they should also be equipped with the latest software package that calculates each purchased item and creates the maximum deduction allowed by the IRS.

• Start your business correctly- If you are starting up a business, an LLC may be the right choice for you. LLCs offer the advantages of limited liability and partnership taxation. There are still good reasons for choosing to operate your business as a C corporation, S corporation, or sole proprietorship, but LLCs are often the best choice.

• Changes- Nothing is as consistent as change.  Make sure that your preparer is aware of any changes in your tax status, such as marriage, divorce, birth or adoption of a child, etc.  Any of these types of changes can affect your return and help determine which deductions are available to you.

• Charity- Not only does it begin at home, but you need a receipt!  It is always a good habit to get receipts for any items that were donated to charity, such as Goodwill, ARC, your local church, etc.

• Education- Do not lose out on higher education deductions! From the new benefits some states offer through 529 plans, to the Hope credit,  to claiming your deduction for a college student, please let your tax professional know about all higher and continuing education plans for you and your family.  

• Self-employment- As an Owner Operator, you have the pleasure of paying taxes each quarter, as well as annually.  It is much easier to have your tax preparer set you up to estimate and pay these taxes than tracking it all on your own.

• Work smart- Get instruction from your tax professional on how to get organized for next year.  Get a system that works for you to organize, set up files, prepay some items, hang onto receipts and anything else to make tax time easier for you and your preparer.

• Medical Reimbursement Plan – BizPlan (Section 105 of the US tax code) allows self employed, home based and other small business owners to create their own medical reimbursement plans – and realize the same tax advantages as big corporations.  BizPlan is specifically designed to create and administer your medical reimbursement plan for you – simplifying the work required, and keeping you fully in compliance with all regulations.  The result is real money – a significant savings of federal, state, and self-employment taxes.

Every owner operator or independent driver’s tax situation is different so this article is not intended to provide specific tax or accounting advice or counsel.  Check with a tax professional for advice specific to your situation.

Jim O’Donnell is CEO of Trucker Tax Service, a firm specializing in tax preparation and rapid refunds for those working in the trucking and transportation industry.  The professionals at Trucker Tax Service have many years of combined experience in helping self-employed drivers prepare their taxes.  If you have specific questions, please call (888) 799-1099 or visit us at www.truckertaxservice.com.