Tax Defense Network’s Senior Licensed Tax Professional Jonathan Bochese, and Registered Tax Return Preparer Krystle Hoard were joined by Tom Weakly, Director of Operations for the Owner-Operator Independent Driver Association (OOIDA), and Tom Gann, the Corporate Trainer for OOIDA for the foundation’s Business Education Series webinar on December 6, 2012.
The guests discussed the tax issues many owner-operators experience when trying to file their estimated taxes for their truck or fleet of trucks. With most trucking firms being run from the home of the owner-operator, many truckers were interested in the panel’s advice.
The first topic dealt with the best way to organize documents for tax filings. Krystle Hoard explained the simplicity of having all the required tax documents in electronic files because it makes the filing process smoother and quicker. However, she warned that having spreadsheets documenting expenses would not be acceptable to the IRS without hard-copy receipts proving the expenses recorded. Licensed tax professional Jonathan Bochese elaborated that it is beneficial to have hard copies of all documents in cases where an owner-operator needs to send the documents to a tax preparer or for an IRS audit.
The next tax-related question discussed filing quarterly taxes. This important topic was addressed by Hoard, who discussed the differences between a W2 employee and an owner-operator in regards to federal taxes, and FICA taxes which include Social Security and Medicare. Hoard stated that FICA taxes for the self-employed for 2012 was 13.5 percent of their net income. She went on to stress the importance of making quarterly tax payments so that by the end of the year, owner-operators do not have a large tax bill to cover, as well as additional penalties and interest as a result of not making quarterly tax payments.
Hoard went on to talk about how owner-operators can estimate their taxes correctly so they do not receive understatement penalties from the IRS. She admitted that it can be tricky for a lot of people just making the transition from a W2 employee to an owner-operator, but advised that one helpful way to stay on top of quarterly taxes would be to make monthly tax payments until a history of income is established.
“You need to send at least 13.3 percent of your monthly net income just to cover your self-employment tax. In addition to that, you might want to add another few hundred to cover federal taxes,” Hoard explained.
Bochese went into further detail on how new owner-operators can estimate the 90 percent current tax due by running a profit-loss statement, and reducing the gross receipts down to the original net income in order to find the correct tax bracket the income falls under to pay the proper amount to the IRS. Bochese advised first-time owner-operators to consult with a tax professional on the best ways to find out their tax obligation.
Tax Defense Network has over 35 years of trucking industry knowledge and specializes in taxes regarding owner-operators. For more information on Tax Defense Network, or its tax services, please contact us.