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How Owner/Operators Can Prepare for Tax Season

After a very long year, the 2021 tax season is upon us. As an owner/operator, properly filing your tax return is crucial to the success of your operation. Navigating the increasingly complex tax code can be arduous, though. Multiple deadlines, numerous deductions, and various available exemptions and credits… filing your taxes can feel nigh on impossible. Those in the industry, however, know preparation is key. Plan ahead to ensure you have all the necessary documentation you need to properly file your taxes by the expected deadlines. 

Here’s how owner/operators can prepare for the 2021 tax season.

Which Tax Forms Do Owner/Operators Need?

Let’s begin by answering the most basic question: Which tax forms am I expected to file? This depends entirely on your specific employment status—are you an employee of a trucking company, an independent contractor, or an owner/operator?

If you are employed as a driver for a carrier company or similar, you should receive a standard W-2 form for filing your taxes. The W-2 details the amount of wages you were paid during the previous fiscal year of employment. This form is the most straightforward filing procedure since there are no job-related expenses. 

If you are an independent contractor or owner/operator, however, you will receive two tax filing forms: a 1099-MISC and a 1099-NEC. What’s the difference between the two? The 1099-MISC is an information return form (similar to a W-2) used to report payments made from a business to an independent contractor. Any independent driver who makes more than $600 from one particular source will be expected to complete a 1099-MISC from that source. The 1099-NEC, on the other hand, is used for independent contractors to report payments received from businesses for work performed. Independent contractors and owner/operators are required to complete and file both the 1099-MISC and 1099-NEC forms with the IRS.

When are the Filing Deadlines?

Don’t get slapped with a hefty penalty by missing the appropriate filing deadlines. The IRS penalizes workers for multiple reasons, including failure to file taxes and failure to pay taxes. Penalties include steep fines, seizure of property, and even jail time. Protect yourself by knowing the important filing and extension dates. 

  • February 12: The IRS begins accepting and processing individual tax returns.
  • April 15: The date for employees to file their returns or request a deadline extension.
  • April 15: Any unpaid taxes must be paid in full to avoid owing interest and penalties. 
  • October 15: Final date to file for those who requested a deadline extension. 

Notice that April 15 is an especially important date as it is the deadline to file your returns, request an extension on filing, or pay any unpaid taxes to the IRS. 

What’s the Recovery Rebate Credit?

This year, many working individuals will have the ability to receive a tax credit if they did not receive a stimulus check. If you received the maximum amount of payment from both federal stimulus checks, then there is no impact on your taxes and you do not need to report the stimulus payment as income. If you are one of the many owner/operators who did not receive the full stimulus payment amount from one or both stimulus packages due to your level of income, you may be eligible for the Recovery Rebate Credit. The Recovery Rebate Credit is designed to either increase tax refund amounts or decrease the amount of taxes owed for workers who did not receive the full economic relief payments from the federal government. 

To be eligible for the Recovery Rebate, you must be a U.S. citizen or U.S. resident alien, cannot be claimed as a dependent for tax year 2020, and you must have a Social Security number valid for employment. To determine whether or not you are eligible for the Recover Rebate, fill out the Recovery Rebate Credit Worksheet in the Instructions for Form 1040 and Form 1040-SR.

Filing your taxes can be intimidating, as the United States tax code becomes increasingly complicated each year. Rest assured, you don’t have to go at it alone. If you are concerned with your ability to file your taxes correctly and on-time, hire a professional tax preparer to help guide you step-by-step through the filing process. Protect yourself and avoid making common mistakes by filing the correct forms by the appropriate deadline.

3 Mistakes Every Owner/Operator Should Avoid

3 Mistakes Every Owner/Operator Should Avoid

Starting out as an owner/operator can be a difficult and complex endeavor. Purchasing the right long-haul vehicle, learning standard practices and procedures of the industry, and understanding how to file your taxes properly are just a few of the challenges rookie truckers face early on in their careers. This means drivers need to be aware of the pitfalls that often plague owner/operators, costing them time, money, or overall safety.

Here are the top three mistakes to avoid as an owner/operator.

1. Thinking It Will Be Easy

The decision to become an owner/operator can be done for a myriad reasons, but one of the worst cited reasons is because “it’s easy.” It’s not. To begin with, CDL training is not like getting a regular driver’s license; there are far more rules and regulations you must adhere to on the road. Furthermore, the training courses can last for up to 12 hours a day, five days a week, for three weeks depending on which state you get your license in. The test at the end of your training course covers general knowledge, combination vehicle types, exterior vehicle inspection, and even a test on air brakes. Drivers must also provide proof they passed a physical health exam or they will not receive their license.

It’s not just the licensing process that is difficult, either. Life on the road for a long-haul driver is tough, logging 11 hour days behind the wheel for days on end. Drivers must be cautious of other motor vehicles around them as well as driving conditions along their route. When stopped for a break, truckers must be cautious when leaving their truck and make sure their load, as well as their personal safety, is intact. Being a long-haul driver is difficult and can be dangerous, but if you maintain safe practices and stay cognizant of your surroundings, you’ll find success.

2. Neglecting Your Health

Another mistake novice drivers make is neglecting their health. The CDC has found that long-haul drivers are at an increased risk of dangerous health issues, including obesity, heart disease, high blood pressure, and even diabetes. These health issues are usually due to an unhealthy diet combined with an unavoidable sedentary lifestyle. Physical health issues aside, the isolation from being on the road for days—if not weeks—can impact a driver’s mental health and emotional well-being. Long-haul drivers suffer from higher rates of depression, anxiety, and even suicide. Protecting your mental health while on the road is especially difficult since there is a general lack of human connection for the vast majority of your time working. To combat these issues, some drivers perform calisthenic exercises at rest stops to improve their physical health and use hands-free technology to connect with their loved ones while on the road.

3. Ignoring Safety Practices

One of the worst mistakes truckers make is ignoring safety practices. Whether that be forgetting to perform an exterior inspection of the vehicle or driving for longer than the legal limit, ignoring safety practices is a surefire way to put yourself or others in harm’s way. Safety protocols are typically in place for a reason, and in the trucking industry, those reasons are serious. A semi-truck in the United States can have a maximum load weight of 80,000 pounds, which is not to be underestimated; a truck weighing 80,000 pounds traveling at a speed of 2 miles per hour has the same momentum as a 4,000-pound SUV traveling at 40 miles per hour. If a driver fails to perform a vehicle inspection prior to hitting the highway and has a blowout while traveling 70 miles per hour, the results could be cataclysmic.

Safety practices don’t just pertain to the vehicle. Drivers need to follow proper safety protocols when it comes to their rest and health. A tired driver is a dangerous driver, and it only takes a fraction of a second for something to go wrong. At 70 miles per hour, a vehicle travels over 100 feet per second, depending on the weather and road conditions. If an exhausted driver on their sixtieth work hour of the week closes their eyes for just one second, it could mean the difference between life and death for themselves and the people on the road around them.

Being an owner/operator can be an amazing and rewarding career for the right person. You get to travel the country seeing the beautiful landscape and meet new, interesting people in your industry. As you grow your owner/operator career, make sure not to let one of these three big mistakes have a negative impact on your profession or your life. Take your job seriously, protect your health, and follow all of the safety practices put in place. It’s that simple.

5 Things CPAs Must Be Aware of When Filing Taxes for Owner/Operators

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The COVID-19 pandemic created a situation where e-commerce sales have grown astronomically—with total online spending in the month of May reaching upward of $82 billion (an increase of 77% year-over-year). This rapid increase in online sales also led to an upsurge in the demand for trucking services, and with trucks having limited storage capacity, the trucking industry as a whole has seen a steep uptick in demand and revenue—in September alone dry-van spot rates hit a record high of $2.37 per mile. With success comes responsibility: More than ever, it’s important for owner/operators to ensure their taxes are filed accurately and on time to maximize their return and avoid penalties.

Here are five things CPAs must be aware of when filing taxes for truck owner/operators:

1. Per Diem Rates

Filing taxes as an owner/operator can be complicated and navigating the tax code can feel arduous. One of the most beneficial tax incentives for an owner/operator is the ability to deduct certain costs under the travel expense tax category, including a per diem tax deduction equal to 80% of $66 per day. In order for an owner/operator to be eligible to receive a per diem deduction, the IRS has two specific requirements:

    1. The owner/operator will be away from home overnight while traveling for work
    2. Work requires travel substantially longer than the length of a workday

Be sure to keep track of receipts from travel expenses, including meals and lodging, in order to capitalize on all per diem tax deductions and avoid losing hard-earned money while on the road.

2. Mileage Deductions

For owner/operators, the IRS considers a semi-truck to be a qualified non-personal use vehicle, which means mileage cannot be deducted as a part of business expenses. This is because owner/operators are taxed only on the profit they make and receive deductions for time off and “deadhead miles,” or miles driven without a load on a truck’s trailer. Although mileage cannot be deducted while on the road since the truck is considered a non-personal vehicle, what can be deducted are actual expenses for the truck such as fuel costs, oil changes, minor and major repairs, insurance, and even tires. Additionally, while truck mileage may not be deductible, mileage on personal vehicles used for work can be deducted if the vehicle is used for business-related driving such as during trips to a supply store or the bank.

3. Depreciating Property Deduction

One of the largest tax deductions owner/operators are eligible for is the depreciable property tax which allows owners to deduct the depreciated value of the equipment that they use—most importantly, their truck and trailer. Owner/operators have the option to choose from a variety of different depreciation schedules in order to meet their specific tax needs, providing owners with the option of an expense deduction up to $1 million for a new truck in the first year of service.  The depreciating property tax may be one of the most important tax deductions an owner/operator needs to be familiar with.

4. Tax Form 1099-NEC

For the tax year 2020, the IRS resurrected the 1099-NEC (non-employee compensation) tax form requiring owner/operators to file their taxes differently than they have in the past. Typically, at the end of the year, an owner/operator would receive a 1099-MISC form from the companies they contracted as a driver for, fill out the form, and submit that form to the IRS. This changed for 2020; now the IRS requires owner/operators to complete both the 1099-NEC and the 1099-MISC. The 1099-NEC is used exclusively to report the compensation received by contractors for fees, commissions, rewards, and other forms of payment for services rendered while the 1099-MISC is used to report miscellaneous income such as rent or legal settlement payments. Ensuring the appropriate tax forms are correctly filed within the IRS deadline is important to prevent the IRS from performing an otherwise unnecessary audit of an owner/operator’s finances.

5. Security Dog

If an owner/operator brings their dog on the road with them, there are circumstances where expenses related to the dog can be used as tax deductions. If an owner/operator uses their dog as a form of security for themselves and their truck, then expenses related to the dog while on the road are tax-deductible. These expenses can include dog food, training, veterinarian bills, or other expenses incurred in the process of caring for the dog. In order to utilize this tax deduction, the IRS requires any dog used as a guard dog must receive training from an accredited training service or school—the cost of training is deductible as well.

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5 Biggest Owner Operator Expenses

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As of 2019, the average gross salary of an owner/operator is $220,591. However, this figure does not take into account the expenses incurred each week. On top of standard expenses, the installation costs of a new tractor can run a hefty price tag (over $100,000). For owner/operators, this presents a unique challenge of navigating their budgets.

The key is this: Like any business owner, you need to have a thorough understanding of your cash flow as a trucker, especially if you’re an owner/operator. By asking the necessary questions—“What are the costs of my expenses?” and “What is my net profit after taxes?”—can save you from encountering many financial troubles. By identifying your specific losses due to expenses, you’ll unlock the key to success as an owner/operator.

Here, we present five of the biggest owner/operator expenses and how to account for each in your total budget.

1.Fuel

Fuel is by far the greatest expense to those owning and operating a truck; the average fuel cost for owner/operators ranges from $50,000 to $70,000. You don’t have to estimate your fuel costs each week, month, or year, though. Plan in advance by sorting out your truck’s average cost per mile. This is done by dividing your fuel cost per gallon by average MPG, then multiplying that number by the expected number of miles you’ll drive. Once you have that number, the next thing to do is figure out your fuel efficiency.

The most effective way to get the ideal fuel mileage is by finding the best RPM to run your engine. When you pull your load with torque and not horsepower, you’ll burn less fuel because your truck will use less energy.

2.Your Truck

The truck itself is another large expense, and the primary truck-related expenses pertain to maintenance and tires. Though the price for maintenance may vary depending on other factors, such as the age of the truck, make, and model, alongside the quality of maintenance, you can still expect it to run you approximately 10% of overall costs. It’s helpful to budget for more than you think your maintenance will cost to avoid any financial surprises. Make sure to set aside a maintenance fund.

Furthermore, the average annual tire expense for retreading can exceed $4,000. This number is contingent on variables like miles driven, load weight, number of tires you have, types of tires you purchase, and wear patterns of the truck. When it comes to making the most cost-effective decision in purchasing tires, it’s important to consider the cost and expected lifespan of the tires.

3.Food & Drink

Even for the everyday person, dining out can quickly add up. Owner/operators are constantly on the go, and the prices of food and snacks are often significantly higher on the highway. This means it’s especially important to budget for eating at restaurants, snacks, and drinks. Once the budget is set, do your best to stick to it.

There are a couple of ways you can cut costs when it comes to food and beverage. Invest in keeping a mini-fridge and microwave in your sleeper. Owner/operators are also given a per diem tax break for travel expenses, including meals. As of last year, the per diem rate is 80% of $66 per day. Just be sure to save all receipts for qualifying tax deductions.

4.Taxes

As a hired truck driver, you hardly have to worry about taxes because the company handles such matters. However, owner/operators are responsible for paying a variety of taxes, including but not limited to the fuel tax, federal heavy vehicle use taxes, self-employment tax, and so forth. To avoid any unnecessary stress or confusion, use of a professional tax preparer to ensure you receive every possible deduction and your returns are handled properly.

5.Insurance

Trucking insurance also packs a hefty price tag, costing owner/operators anywhere from $8,000 to $14,000. Some coverage is required, while other insurances are optional. Common insurances needed are Truckers General Liability, Primary Liability, Physical Damage, and Non-Trucking Liability. Be sure to examine your coverages carefully as all insurance isn’t created equal. An insurer might offer cheaper coverage, but that doesn’t necessarily mean it’s the protection you’ll need on the road. Just as essential as having an insured truck is having health medical coverage for yourself. Be sure to factor this must-have into your budget as well.

For more information on how to achieve success as an owner/operator, be sure to follow our blog to stay in-the-know with the latest industry news.

5 Ways to Manage an Over-the-Road Trucking Company

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When you manage your own trucking company, you’re expected to handle all hauls with complete efficiency; and that’s on top of taking care of a long list of other crucial responsibilities necessary for your company’s survival. Throughout the COVID-19 pandemic, owners/operators have had their hands full as many companies rely on them to fulfill orders and accomplish essential hauls. But even as the workload increases, everything must continue to run smoothly. Experienced truckers know that requires superior management skills.

In this article, we’ll go over the top five responsibilities an owner/operator must handle on a day-to-day basis and how to manage them properly.

1. Clients

A recent survey found 78% of clients have canceled business transactions due to poor customer service quality; no clients equals no revenue. When managing your own trucking company, it’s essential to prioritize your clients in order to develop and maintain consistent, positive relationships. Once you arrange and schedule your hauls, you should communicate the details with clients and keep them in the know in the event of any changes. This demonstrates excellent communication skills and work ethic—two things absolutely necessary in order to create a steady workflow and a stable, profitable company.

2. Health

Nearly 1 in 15 people work in what is considered one of the nation’s unhealthiest industries: the trucking industry. In 2019, a study from Business Insider found 7 out of 10 truck drivers were categorized as obese and about 17% were considered morbidly obese. When you’re sick and not on the road, your company loses revenue and crucial business opportunities. Try incorporating these lifestyle changes to combat any health problems and keep on trucking:

  • When you’re done for the day, take some time to exercise.
  • Develop and maintain a healthy sleep schedule.
  • Cook our pickup healthy meals for yourself; skip the drive-thru.
  • Drink plenty of water.
  • Give up smoking for good.

3. Expenses

On average, the trucking industry rakes in $255.5 billion in revenue each year—but everything comes at a cost, and running your carrier authority is no exception. As a manager, it’s your job to track and manage your company’s expenses using organized and detailed records. In doing so, your company will have a greater chance of surviving, as you’ll be able to track whether your company is gaining or losing money. If you find you’re entering a potential deficit, you need to readjust how you operate and fund the major expenses (e.g. fuel, food/drink, insurance, and rigs) by developing a budget. Of course, there will be unforeseen expenses, so plan ahead by creating an emergency fund. Over time, you’ll learn how much you spend per month and how to lower costs and operate more efficiently.

4. Fuel

It’s crucial to properly manage fuel usage and its expense. On average, truck drivers will log between 2,000 and 3,000 miles per week and more than 100,000 miles per year; this translates to around 53.9 billion gallons of fuel annually. Pair those numbers with the fluctuating diesel prices, and you’ve got a serious expense on your hands. However, there are ways to manage your fuel usage and minimize the cost, such as monitoring your rig’s tire pressure, minimizing idling, moderating your braking, and managing cruise RPM. Not sure if these things are helping you reduce fuel consumption? Try tracking your fleet’s fuel expenses before and after applying these changes, and see how much you save.

5. Taxes

When you own and manage a trucking company, you are responsible for calculating and paying your taxes correctly each quarter, plus filing several tax forms and schedules, such as W-9, 11099-NEC, and Form 1040. If your taxes are not tracked or paid correctly, your business could be in jeopardy. To avoid any missteps, keep a profit and loss statement each quarter, set aside 25 to 30% of your weekly net income, and pay your quarterly taxes on time to avoid penalty charges.

Ready to start your career as an American truck driver? Want to learn more about what it takes to succeed as an owner/operator? Check out our latest post, 5 Things Owner/Operators Should Do to Achieve Success.

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5 Things Owner/Operators Should Do to Achieve Success

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Trucking is an expansive and flourishing occupation—and it’s one of the industries that hasn’t slowed down during the current COVID-19 crisis. Companies and essential businesses turned to trucking, heavily relying on owners/operators to deliver their much-needed products across the nation. With this level of productivity and increased activity comes the question of success. What is now deemed “successful” in the trucking industry?

For some people, success is defined by what they have. For truck drivers, success is determined by their quality of work and the professional milestones they meet. But if you’re new to owning and operating your own business, figuring out how to measure success outside of just numbers can seem overwhelming. There’s so much more to success than sheer quantity or numerical values. In this article, we’ll break down the top five things you should do if you’re aiming for success in the trucking industry.

1. Be Positive

Trucking can be a strenuous job, but if you approach your career with set goals and a positive attitude, you’re more likely to beat out the competition and thrive as a business owner. It’s essential to consider your needs and desires to establish your short-term and long-term goals. Write out your goals and treat them as stepping stones to your future. Another tip for success: Try starting your day with “I get to” instead of “I have to.” When you work as an optimist, you can be 20 to 40% more successful than pessimists.

2. Health Matters

Successful business owners know a healthy body leads to a healthy mind, which leads to a healthy business. Researchers at the University of Georgia asked a group of people who make upward of $100,000 per year what helps them find success in their work. At least 75% credited their focus and drive to physical fitness. If your health is compromised by an unhealthy diet or lack of exercise, you’re almost guaranteed to spend more time in a doctor’s office and less time running and growing your business. An unhealthy lifestyle also leads to poor leadership skills and personal qualities, like tiredness and irritability. By staying on top of your health, you’ll be more energized, focused, and capable of taking your trucking business to the next level.

3. Focus Is Key

Business owners become successful by staying focused, committed, and driven. It’s easy to lose focus in the hustle of day-to-day operations; to grow your business, however, try incorporating healthy and productive habits. Each morning, write out your goals for the day then focus on them one at a time. When you focus on too many things at once, you lose up to 40% of your productivity. Working one goal at a time will help you hone in on the day ahead. While on the clock, eliminate distractions and stay committed to your goals. Combine your focus and commitment, and those around you will see you as a driven leader and someone they want to work with.

4. Work Harder and Smarter

Having a business means setting goals, achieving them, then working hard to outdo yourself on your next set of plans. A study from Harvard showed 3% of graduate students had written goals and plans. Ten years later, the 3% were making 10 times more than the 97% who didn’t have written goals. Make your goals achievable, then strive to achieve them. To work smarter, try placing your simple tasks and goals at the start of your day. It’ll give you a sense of accomplishment and help you conquer the more challenging tasks later.

5. Don’t Be Afraid to Fail

Finally, don’t be afraid to fail. It works exactly how it sounds. Things don’t always go according to plan. Some things are past our control, and that’s OK. Successful owners aren’t afraid to leap, even in the face of potential failure. It’s important to lose any fear of judgment and view your losses as learning opportunities. To get to your future, weigh the pros and cons of new options, accept any outcome, then strive for the next best thing.

Now that you have the tools for success, it’s time to get to work.

Interested in learning what it takes to become a successful owner/operator? Check out our post, How to Succeed as an Owner/Operator. For more industry news and content, stay up to date with our blog. Ready to begin your career as a trucker, but need some financial guidance? Visit our website to view our list of services, and contact us with any questions.

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