Transportation Tuesday Tip #17: How to avoid tax filing headaches

In our Transportation Tuesday series, we’re partnering with industry leaders to share tips on how you can improve your business success and growth. This week’s tip is brought to you by Comdata. 

Tax season is stressful. Dealing with money — and possibly owing the IRS a lot of it — is hard on a lot of us. Complicated tax laws and tax-filing processes don’t help.

This hits owner-operators even harder, especially if they also operate fleets. Doing your taxes, on top of the million other things on your to-do list, adds strain. But it doesn’t have to be that way forever.

Here’s what owner-operators can do right now — and throughout the year — to avoid tax headaches.

Get organized

If you’re keeping records with a shoebox and a bunch of crumpled-up papers, you are guaranteed to have a tough time doing your taxes.

The first step to a stress-free tax season is to get organized. Key to that is tracking your business expenses regularly.

Find a way to log and file all your business-related receipts on a rolling basis. For instance, there’s plenty of computer software and smartphone apps that can snap a picture or scan receipts and log them.

As for keeping the paper receipts, the easiest way to do it is to keep them divided in separate folders based on categories. For example, you can categorize your expenses into the following groups: fuel, repairs and maintenance, tolls, hotels, food, supplies, permits and fees, and any other category you might need to take into account. Paying for your vehicle-related expenses using a fleet card can make a big difference. Not only will you eliminate the need for stacks of paper receipts, you’ll typically receive regular expense reports that make documentation and tax preparation much easier.

Tracking your business expenses throughout the year is essential for a fast and smooth tax-filing process. It’s also very important in making sure you claim all the deductibles you can, helping to lower your tax burden.

Learn more about tax laws

Another important step to getting ahead of next year’s taxes is familiarizing yourself with the tax laws that apply to you, and learning as many details about the process as you can. This will help you save time when you actually start preparing your income taxes because you’ll already have the relevant information.

For instance, you might wonder about the procedure involving the per-diem deduction, the types of write-offs that apply to you as an owner-operator and the ones that don’t, or even how truck depreciation is calculated.

Do online research and even consult tax or SMB professionals to make sure you are up-to-date on all the tax regulations that impact your business.

The most common deductions for owner-operators

The list of possible deductions for owner-operators is pretty long. Although it can vary from one owner-operator to another, there are some common items that apply in most cases. Here are some of the typical fleet-related costs you will most likely be able to claim as deductions:

  •   Repair and maintenance costs
  •   Fuel, oil and coolant
  •   Supplies for your truck, including the delivery costs
  •   Permits, license fees and commissions
  •   Lease payments
  •   Home office costs (rent, electricity, etc.)
  •   On-the-road food and drinks
  •   Insurance premiums
  •   Accounting and legal
  •   Lodging
  •   Tolls
  •   Parking fees

In addition to these common deductions, there are a couple of other potential write-offs that are sometimes disregarded. For instance, if a carrier you subcontract requires you to wear a uniform, you may be able to expense the cost of buying and cleaning it. You can often claim safety clothing, such as gloves, coveralls, glasses, steel-toed boots and so on.

Retirement plans are also a deductible. These may include a Keogh plan for yourself or for your spouse, an individual retirement account (IRA), a simplified employee pension (SEP) or other plans that are applicable to self-employed individuals.

Another potentially significant group of deductibles to keep in mind are depreciation costs related to equipment you use for business purposes. In addition to trucks, this can include computers, desks, chairs, copiers, phones and fax machines, to name a few.

Calculating the depreciation of property can be particularly confusing. There are a lot of variables involved and a couple of different methods to calculate and file it. You can either go with a straight-line method, where the depreciation is calculated in even amounts over the course of multiple years, or a declining balance method.

It comes down to the type and class of the property in question, when it was put in to service, and a few other factors, which can make the whole process daunting and confusing. But the IRS provides enough information to get you familiar with the procedure behind property depreciation, so it would be good to learn as much about it as possible before you start.

Get ahead of this year’s tax season

Let’s be real: Filing your taxes will never be a treat. You can, however, make tax time easier and faster thanks to meticulous record-keeping throughout the year, learning more about the tax regulations that apply to you and finding out how to maximize your deductions. With these tools, you can mitigate most of the annual stress and headaches, and get through tax season with time and money to spare.

Have a tip to share or want some advice?

If you want to share your own insight and be featured in our next Transportation Tuesday Tip or if you want us to dive deeper into a challenge you’re facing, email us at [email protected].  

About Comdata

Comdata is a leader and innovator in fleet payment solutions that allow owner-operators and smaller fleets to save more and spend less. Comdata is the most widely recognized and accepted fuel card nationwide and offers fuel and other discounts, fleet management reporting tools, and tools to combat fraud.

Learn more about how the Comdata Fleet Card can best serve your fleet.