iStock_000082097885_Full-(2).jpg

I hated taking tests when I was in school. I was a terrible procrastinator, and would wait until the very last minute to study. I’d stay up all night pounding energy drinks and staring bleary-eyed at my flashcards, as though looking at them long enough would burn the facts in my memory. By the next morning, I’d be stressed, nervous, and kicking myself for not preparing earlier.

Now that I’m older, I like to think I’ve gotten a little wiser. I try to plan ahead for things and not wait until the very last moment, especially for the really important stuff. I try and have my mortgage payment in before the first of the month and I always file my taxes well ahead of the date they are due. I want to make sure it gets to the IRS with plenty of time to spare.

If you are an owner-operator, paying taxes is a big change from the days when taxes were withheld from your paycheck as a company driver. It’s important to be diligent about how much money you set aside throughout the year. Since January through March are the slowest months of the year for freight cycles, having a big payment due at the end of those months can be a huge burden. Therefore, ATBS recommends that drivers set aside between 25 and 30 percent of their weekly net income for quarterly taxes.

Create an organizational system for your business, and make it a priority. Get all of your paperwork, tax documents, and your finances in order to start the year off right. It may seem like a big change at first, but setting aside money with each check can quickly become part of your routine.

Why is it important to pay your quarterly taxes?

If you fail to pay your quarterly taxes, you will be charged a late payment penalty. Let’s assume that you also failed to file – that’s another penalty tacked on to what you have to give to the government. The current interest rate is three percent, which will get charged on top of the amount you owe after all the penalties have been added on.

How much do you pay?

For owner-operators estimating taxes based on actual income is recommended since your income can vary significantly each month. You wouldn’t want to inaccurately estimate quarterly taxes and pay more or less than what is actually owed.

How do you pay your quarterly taxes?

You can pay your federal quarterly estimates online at eftps.gov. Many states now allow you to make payments online as well. Go to your state’s department of revenue website to see how you can make a payment. For convenience, there is another secure site where you make state and federal payments together. This site is officialpayments.com. The only downside is that they charge you 2% of what your payment total is.

Technically you have the right to wait and pay your taxes once a year, but is it really worth it? When it comes to taxes, I’d rather take small steps towards doing it right than hand over more of my hard-earned money.

If you have any questions about paying estimated taxes, call ATBS at 866-920-2827. One of their business consultant or tax professionals would be more than happy to assist you.

Comments (8)

Read These Next...

 
 

One thing I have learned in the 18 years in this industry, nothing remains the same. I have only been an o/o for the last 8 years and when it comes to quarterlies, I forget about the past year and figure everything on my current quarter. A lot of work, but then again, a successful business of any kind requires work.

May 04, 2014 9:50:33 AM

That's a great idea, Jeff! An excellent practice for your business. Tyrone, we're happy to have you! And Craig - thank you! You're so right about communication, that's definitely a vital part.

April 24, 2014 11:33:04 AM

In some ways I wish that everybody actually had to write check to the government then they might realize how much we are actually paying. I use the previous year's tax to pay my quarterly estimates, but keep an eye on the current year's profits. If they are higher, I make sure to put some of them aside. Then when I file my extension, I will include a check with the estimate on how much more I owe.

April 24, 2014 7:21:42 AM

I AM SO GLAD THAT I AM NOW A MEMBER OF ATBS!!!!

April 23, 2014 18:44:18 PM

Great question, Linda! For an Independent Contractor, net income is generally defined as Gross Revenue minus Total Expenses.  It could be thought of as the "bottom line".  It's what is left after you've accounted for all of your business expenses, including fuel, maintenance, insurance, and any other cost associated with operating your trucking business.

April 22, 2014 15:59:35 PM

Beth the fear of a big tax bill keeps me from procrastinating! The big question we are often asked is what is considered Net Income? What has been taken out?

April 21, 2014 14:35:40 PM

Great information for everyone, Beth. I was amazed that a tax bill of $6,500 could grow to $9,785 from penalties!

April 18, 2014 14:13:44 PM

Great article Beth, I hope people will take notice of what you are saying. Procrastinating has never worked for me. Not only do you take the chance of being late and incurring additional fees, the stress just isn't worth it. When you have an organization such as ATBS working for you there really isn't any reason not to be on time, all it takes is regular communication and good bookkeeping.

April 17, 2014 14:01:09 PM