Owner-Operator Tax Question & Answer Guide

+500 MILES
The Most Commonly Asked Owner-Operator Tax Questions
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: When do I need to have year-end tax documents into my tax preparer?
A: If you are using ATBS you should have the documents to them by March 7th. Contact your preparer for their deadline.
 
Q: I cannot get my taxes done on time. What should I do?
A: Let your tax preparer know as soon as possible. They will file an extension for you.
 
Q: Will I receive a tax refund?
A: Not likely if you are an owner-operator. A leading tax preparer, like ATBS, tries to keep you as close to zero as possible. If you are getting a refund, you have given the government an interest free loan.
 
Q: Will your tax preparer send your 1099 Misc form?
A: No, your carrier will send you your 1099 Misc form.
 
Q: I did not pay my quarterly tax estimates in 2013. What is going to happen?
A: The IRS will charge penalties and interest for the tax not paid. If you are using ATBS, their tax department will calculate that charge and include the penalties and interest on your year-end tax return.
 
Q: What tax forms do you need to complete for a contract laborer, (for example an employed team driver)?
A: If you have an employee you should be running payroll and issue them a W2 at the end of the year.
 
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 a (1040 form). The 1040 will have 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 on the days you are working away from home. The current rate is 80% of $59/day. Visiting family or friends for a few days do 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. (Click here for more information on the Per Diem tax deduction.)
 
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 6 months; so do not wait until the end of the year to ask for a copy. Another method to count Per Diem days is to mark the days on your calendar. Put an ‘X’ on full days away and a ‘/’ on partial days so you can easily count the days at the end of the year. 
 
Family Related Questions
Q. Should I file my tax return separately from my spouse?
A. As a married taxpayer, you have two choices, Married Filed Jointly and Married Filed Separately. Generally Married Filed Jointly will work out better for a taxpayer, but not always. If you are using ATBS, they can prep the return both ways and then provide you the results to decide.
 
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, an in-law, or grandparent.
 
Q: How much of my (or my spouse’s) Social Security income is taxable?
A: How much, if any, of your (or your spouse’s) Social Security benefits are 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, 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 you claim a dependent on your quarterly estimated taxes?
A: No, you should claim dependents only on your year-end return.
 
Deduction Questions
Q: Is fuel tax deductible for truck drivers?
A: Yes, fuel tax is a part of the cost of fuel and it is deductible as an outgoing owner-operator fuel expense.
 
Q: Are coin laundry expenses tax deductible?
A: Yes. Make up your own receipts, including the date, city, state, and amount and send it into your tax preparer with other business receipts monthly.
 
Q: Can I claim the home office deduction?
A: It is very rare that an owner-operator can pass the home office test. To claim the home office deduction, your office at home has to be your principle place of business. This is often a challenge for owner-operators as their truck is generally the "principle place of business". If you have your own operating authority with a spouse at home brokering loads every day, you may pass this test. Claiming the home office deduction can be a large red flag to IRS and cause an audit because it is so rare that a truck driver will qualify for this deduction.
 
Q: Is clothing tax deductible?
A: Coveralls/overalls, gloves, 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 10% of your Adjusted Gross Income you can deduct the amount over 10%.
 
Q: I purchased an APU in 2013. Can I receive a tax credit for this purchase?
A: Yes. Send your tax prepared the receipt for the APU. If you do not have the receipt, write down the purchase price and the date of purchase. 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 it’s expenses (food, veterinary bills) can be deducted from your taxes.
 
Other Miscellaneous Questions
Q: If you sold a home in 2013, 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" this much otherwise taxable profit from your taxable income. (If you sold for a loss, though, you can't take a deduction for that loss.)

Q: If you rented out a home in 2013, do you have to claim it on your taxes?
A: Yes, you will need to fill out a Schedule E.
 
Q: What is the penalty for not having health insurance?
A: It is $95 per adult person, and $47.50 per child, or 1% of family income, whichever is greater.

Do you have additional questions on your taxes for 2013? Ask them in the comments below or consult ATBS, the tax and accounting experts for owner-operators. 
 
Click here to get started on your 2013 tax return.
+500 MILES
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By
miljana KOPRIVICA

Tax Accountant, ATBS

RATE IT+50 miles

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COMMENTS +300 miles

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wanabe1982
According to Healthcare.gov,since Tx. did not extend medicaid coverage to the ACA, Texans who do not have healthcare will not be fined.
3/3/2014 8:48:09 PM

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miljana KOPRIVICA
Jeff - At ATBS we don't use payroll records but in case of the audit, you might be able to justify per diem deduction that way. As far as electric logs, you should be able to save them and calculate per diem days based on those logs.
2/20/2014 2:37:01 PM

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Michele Fry
So very helpful, much needed, keep it coming!! Again ~ Thank you
2/20/2014 12:45:34 PM

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Jeff Clark
We are on electronic logs. Can we use payroll records to certify per diem.
2/20/2014 4:25:36 AM

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Craig McCue
Very nice article Miljana! It is well organized and concise. Thank you for putting this together and answering these important questions that many people have every year.
2/18/2014 1:17:30 PM

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