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Professional Driver Tax Preparation Tips

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As the adage goes, there are only three absolutes in life: birth, death, and taxes. As luck would have it, all three of these apply to professional drivers. If you drive as an occupation, you obviously are aware you have to pay taxes on what you earn, but how you do so depends strongly on what kind of employee you are and who you work for.

Whether you're employed by a company and receive a salary and benefits or you drive for yourself and make your own rules, understanding the ins and outs of professional driver tax preparation can save you money, anxiety, and time when tax season rolls around.

W-2 Employees

If you are hired by a company and receive hourly or salaried pay with taxes withheld, you are considered an employee by the Internal Revenue Service. Like with all tax issues, however, this holds unique benefits and disadvantages.

As employees, some portions of federal, state, local, Social Security, and Medicare taxes are paid by an employer, reducing burdens at tax time. This income is reported on form 1040, like any other job. Some expenses, so long as you paid for them out of pocket and were not reimbursed, like vehicle expenses, travel expenses, licenses, and regulatory fees, may be deductible, which can be reported on Schedule A, which documents itemized deductions. These charges are only applicable for those with adequate deductions to itemize however; taxpayers with deductions that do not exceed the annual standard deduction amount will not be able to benefit from outside expenses.

Employed drivers may not be able to benefit from deductions like contracted drivers, but generally have the advantage of employer-paid taxes and work expenses.


Self-Employed Drivers and Contractors

While W-2 employees have security and control, not all drivers fall into this category. In fact, many professional drivers are self-employed or contract with a company, creating an additional set of tax complications.

These drivers do not have tax withheld, but rather receive income reported on a 1099 as a self-employed individual. This kind of income, unlike salaries and wages, must be reported on Schedule C. Contractors do not have tax withheld by a parent company, but are instead obligated to pay both an employee's and an employer's portion of tax, part of which is deductible. Schedule C refers to self employment income, which means each taxpayer essentially operates as his or her own business for tax purposes. Untaxed income will be far higher for contractors than employees, but deductions can mitigate this amount.


Deductibe Expenses

As a 1099 taxpayer, many expenses related to trucking can be deducted on Schedule C as business expenses. These costs differ from Schedule A deductions in that they do not relate to other non-business deductions but instead reduce the amount of business income subject to tax.

Many expenses you may incur as a professional driver can be deductible for self employment purposes, including:

  • Vehicle expenses
  • Travel expenses
  • Union and trade dues
  • Excise taxes
  • Per-diem meal costs
  • Licenses and regulatory fees
  • Insurance premiums
  • Costs and upkeep

Keep these categories in mind as you collect and inventory your costs over the course of a year; the more you can prove, the more you can save.


Nondeductibe Expenses

As with all careers, not all costs are deductible. Even if you pay the majority of your business expenses yourself, our of pocket, you will not be able to deduct:

  • Expenses covered by your employer
  • Non-uniform clothing
  • Commuting costs
  • Home phone and internet lines when not used for work
  • Downtime and unpaid mileage


Tips for All Drivers

Whether you drive for yourself or work directly for a company, keeping careful track of your receipts is a big part of making the most of tax season. While the IRS may not want to see documentation of your every purchase when you file, they will should you get audited. In this instance, your deductions may get discarded if you can't prove how you came to the figure you quoted, potentially costing you hundreds you didn't need to pay.

Professional driving may be an exciting way to spend your time (especially when a day on the road means a stop at Clearwater Travel Plaza!) but tax season is never easy. In order to make the most of your career, a tax professional is the best way to make sure everything is in order. Happy driving!

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Topics: Truck Driver

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