Nobody likes to pay taxes. And there is no reason to pay more taxes than you absolutely have to. As an owner-operator you are in the unique position of being able to write off a large portion of your income. The hardest part of getting those deductions is remembering to take them when it comes time to file your taxes. Keep these tips in mind so that you can make the most of your money.
Keep Great Records
Often people get caught up in the day to day activities of life. You forget to record mileage, business expenses, or any of the other little things that come up throughout the work day. Keeping accurate records can help you reduce your tax bill significantly. And that includes more than just those random supply purchases.
- Mileage can be written off. Many truck drivers understand they can’t write off the miles they drive their truck, but did you know that you can write off other miles? If you are driving your personal car to a meeting with your accountant, to gather supplies, or any other trip that has business intentions, those miles are deductible.
- Food and Entertainment are partially deductible and have special rules to follow. Any time you are on the road, you have the ability to write off the food you purchase (at least in part). Many drivers take the government allotted per diem deduction, which is currently 80% of $63 per day.
- Office supplies, items for your truck, and anything else needed for your business are deductible. Keep the receipt for every purchase you make. It’s easy to forget about those little $5 purchases, but they add up. Just stuff the receipts into an envelope or scan them digitally.
Invest in Yourself
As a small business owner you are in a great position to invest for retirement. Not only are IRA’s available, but there are also retirement savings plans specifically for those who are self-employed.
SEP-IRA - A SEP-IRA has special rules attached to it, so if you have employees, make sure you understand them. If you are the only employee of your company, then you can contribute 25% of your income, or $52,000; whichever is less.
SIMPLE IRA – If you are a single truck owner-operator, or your company has fewer than 10 employees, you can use a SIMPLE IRA. Your annual contributions are capped at $12,500 per year unless you are 50 and older when it’s increased to $15,000.
Find a trusted financial advisor to help you determine which method of investing for retirement is best based on your income needs. There are many tax-friendly options out there, and every dollar you stash away for later can be deducted from your tax bill today.
Invest in Others
Donating to charities is not only a great way to help others, but also a great way to help yourself. There are millions of people out there that can’t provide for themselves or their families. Not only will donating to charity help your tax bill, but it will also help you feel better knowing that you are making a difference in the world. Just be sure to check with Charity Navigator before you donate to make sure your chosen charity is legit.
Every year the IRS collects billions of dollars in penalties and interest because people file their taxes late. As a business owner, you can end up filing late even if you file on time. This is because you will need to file quarterly estimates throughout the year. By making sure your estimates are all in on time, and making sure that you are paying enough throughout the year, you can avoid penalties. It is one thing to pay your fair share of taxes; it’s a whole other thing to pay extra because you didn’t plan ahead.
An owner-operator is in a great position to write off far more of their expenses than a company driver. Even after paying the dreaded self-employment tax, most people are still further ahead being a business owner because of all the other deductions they can get. If you have not spent a couple of hours maximizing your taxes, do so today. Then when you file taxes next April, you can get your tax bill down as much as possible.
Have additional questions about reducing your tax liability? Give a tax professional at ATBS a call at 866-920-2827.