Help with taxes from towing Please

[SteveMiller]

OK, so this last year I pulled some trailers around for a company and made some extra money. Now its the end of the year and i need to know what to do. I know I can file like normal and just put down that I worked for myself. They are going to send me a 1099 form with how much they paid me but I had alot of expenses out of that.



I'd like some help on knowing what I can expect to deduct and what I can't deduct. And any other issues I might come up against.



I kept pretty much all my reciepts. So if I was told right i have a deduction of so many cents per mile I drove. But I have to either use that or the total of the reciepts i have for things like gas and oil. Is that right? Are there things that don't apply to this? Like my transmission went out and I had to replace it. Is that just another truck cost? Do most people use the mileage or the actual cost? Also, does insurance count towards this or is this a seperate cost?



Also what other deductions should I make? I had to buy a tire for one of the trailers, Is there some sort of Costs category that I would put this in? What about hotels and meals? I didn't keep these reciepts unfortunately but am I aloted a certain amount while traveling?



Thanks for any help anyone can give. Also, what do I do with the reciepts? Do I just keep them in case I'm audited or something? I can't imagine they'd waste their time on me since I recieved I think less than 10k for the year doing this but all the same.



Thanks for any help

Steve

 

[rluft]

This sounds like a question for a professional. My wifes uncle is a CPA in Boulder, I would be happy to give you his name if you want it.

 

[SteveMiller]

I tried asking a professional and either they want an arm and a leg or they want to just give me the forms to fill out. And for the most part I don't blame them. Why would they help me do it cheaply when they make their money by knowing what we don't. Anyway, I was hoping some of the other people out there who have roughnecked and had to deal with this would know some of the things I can expect and give me some pointeres.



Thanks though. Its not that I don't appreciate the offer but if I'm going to have to go to a CPA at least I'd want one closer than boulder.



Steve

 

[RRoton]

The way I see it (I am not a CPA) any money I MUST spend to make money is a business expense. If the IRS does not agree, then they can explain it to me when and IF they audit me.

 

[Dual EE]

SteveMiller,



I am not a professional, but this is how my accountant broke it down to me.

There are two ways to do it:



One:

If truck is used for business-all expenses to maintain truck are write offs.

Gas, oil, tires, motor, transmission ect. Some expensive items are depreciated each year.



Two:

You can write off mileage. I think it was 36 cents a mile a few years ago.



Issue with example one is IRS could make you pay some of the depreciated mony back if you sell the truck.



In the beginning, it will probably in your best interest to see a accountant. They could save you a big headache.



Edit: If your insurance company finds out you are using your private vehicle for business they may not cover you in an accident.

 

[Rams-n-Hogs]

The way I understand the rules, DualEE is correct. You can write off mileage, or actual expenses, but not both. And make sure you have receipts for the expenses.



Jim

 

[testraub]

Why not just check out the IRS website and see what you can or can't do? They also have phone help

 

[HBarlow]

Steve,



I'm not a CPA either, don't prepare taxes other than my own, and am frankly not current on the rules but I studied taxation and do have an accounting degree.



You should be able to call the IRS to get good advice as suggested above but surveys conducted by the IRS itself have determined you will probably get a different answer each time you call. In other words, the IRS frequently doesn't know the correct answer.



I don't think you can legally claim a mileage deduction AND expenses. For some business vehicle use such as selling or managing real estate you can deduct one or the other but for commercial trucking I think you can only claim expenses. Major repairs such as a major engine or transmission repair or replacement will probably have to be depreciated over five years which means in simplest terms you can deduct 20% each year for five years.



If you don't want to pay a tax preparer (you might be surprised how inexpensive the service of a tax accountant (not CPA) might be for a simple tax return with modest income) the simplest solution is probably to go to your local library or the closest federal office building or federal courthouse where the IRS is headquartered in your area and pick up the IRS1040 preparation guidelines booklet. It will contain a simple paragraph or chapter on the subject. Also, look for or ask if there is a special booklet providing guidelines for commercial truckers. The booklets are usually pretty simple and intended to help average citizens understand their tax obligation.



As others stated above, any special equipment you had to purchase to earn income with your truck and all expenses of operating your truck should be deductible plus, I think, something like $40/day for living expenses.



If you have lost receipts but have cancelled checks or other evidence to support your claims, or if you can reconstruct what you spent, as long as the expenses are legitimate and reasonable you might get away with deducting them. If you are audited, which is probably unlikely, the auditor will ask for proof. If you can't prove your deductions he or she may throw them out. An honest error or lost receipt is very different from false and fabricated claims. One can increase your tax bill, the other can get you free meals and lodging in a federal hotel.



Be prepared to report and pay 15% of your earnings as your social security contribution as a self-employed contractor.



Harvey

 

[E7mack96]

as I understand it, you use this vehicle for personal use too. That will cause you to pro-rate every expense based on business miles vs. personal miles. In those cases, it is usually easier to take the mileage deduction for the business miles. This covers fuel, oil, and depreciation of your vehicle. Major repairs wouls still be deductable and, if the repair adds useful life of more than 1 year, must be depreciated over 5 years. This would include a transmission or engine. Tires were required to be depreciated until a few years ago. I think the IRS removed their head from you know where, because everyone was writing them off in the year of purchase anyway. How many people do you know that runs their truck for business and still has the tires after 2 years, much less 5 years.

 

[GAmes]

The instructions for schedule C are very specific. "You must use actual expenses if you used your vehicle for hire" The example the IRS gives is a taxi, but it also includes hotshotters and transporters.

 

[SteveMiller]

Thanks everyone for all the info. Even if I find a tax accountant that works for me I'd like to know as much as possible before walking in clueless. Plus it gives me an idea on what to have and how to organize it before I go in.



GAmes I read the same thing in schedule C and was wondering about that because from the people I've talked to that do hotshotting some use mileage and not actual and there doesn't seem to be a problem with that. I guess if the IRS doesn't have the same answer every time though I guess you never know what might pass.



Also for any wondering I was reading on the IRS website also trying to get the info I needed, and it appears that currently its 37. 5 cents per mile. But I could spend years reading everything in there. I think I'll try to get everything straightened out on my own at first and if I get to a point where I think I got a pretty good grip then I'll just file otherwise I'll be calling for help. The transmission thing is good to know though. I'm not sure i would have realized that.



One problem I know will come up and I don't know what to do about it at the moment, is I used my personal truck at the beginning of the year and then realized I needed a dually to do the job better so I got one. Then just this fall I sold my personal truck. I guess I could just do the expenses of running the dually for the business and then the mileage for the personal truck? Guess I'll have to do more digging.



Thanks again

Steve

 

[Eric_77]

Don't forget you can also deduct for traveling a Per diem of $45 I beleive it was last year for each night you are not at home (or within so many miles of home)

 

[Todd G]

Unless you had some major truck expenses last year, the mileage deduction is the way to go. I suggest you try it both ways and take the bigger deduction. You can also depreciate the value of your truck for last year. This can add up to a lot, but remember, if you sell the truck you have to pay taxes on the value.

 

[GAmes]

It is my firm belief that if you use the per mile deduction you are playing IRS roulette with five bullets in the cylinder. I took a tax class once that was taught by an IRS agent. He said that the computer uses "windows" to identify potential audits. For instance, if your gross income is 50k and you deduct 25k for charities that is way outside the window of normal contributions. By the same token, if you gross 45k as a transporter and deduct 39k in mileage, I'd say that is outside the window. FWIW, you can not depreciate the truck and also use mileage.

 

[HBarlow]

GAmes:



You were exactly right when you wrote in a previous post above ---- the IRS plainly states that actual operating and repair expenses must be deducted in Schedule C when the vehicle is for hire, not mileage. I went to the IRS site and reviewed it also.



When a taxpayer uses his or her vehicle for business use but not for hire such as a traveling salesman or visiting nurse that taxpayer has the choice of deducting miles or claiming expenses . . . but it is never permissable to claim mileage AND expenses.



I also quickly reviewed the meals and lodging deduction. As I understand it a taxpayer can either deduct actual expenses or can claim the standard allowance which is roughly $45 per day. That figure is based on 50% of the average national government employee per/diem rate of $60 for lodging and $31 for meals. I think the rate is set at 50% because the IRS figures the driver has to eat whether he is home or on the road but it is more expensive to eat on the road.



Harvey

 

[GAmes]

Here we go with interpretation. The way I read pub 463 is the standard meal rate is $31, but that lodging has to be actual cost. Drivers that fall under DOT regs can deduct 70% of that instead of the normal 50%. In addition only 3/4 of the daily rate can be used on the leave home and return home days.

 

[SteveMiller]

Yeah I kinda read it as Meals there was a rate and hotels had to be actual cost. Which really stinks cause I sleep in my truck. I should charge myself for a room for the night then deduct it. ;-) Ok so maybe not...



Thanks again for all the help. I think I have enough info to do it myself. I think I might try to figure it out myself and then take it somewhere and have them check it. We'll see. Anyway thanks for all the help.

 

[BStoecker]

http://www3.uakron.edu/controller/PerDiem.html



The standard meal per diem is $35, but some places are more expensive. Check the website. It shows what cities are higher in each state.



Again, if you use your truck for hire, you must use actual expenses. If your miles are split between personal driving and business, you must have a mileage log that shows exactly when and where you used the truck for business purposes. I use my truck in my acutioneering business. I can deduct either mileage or actual expenses. Also, if you bought a NEW truck last year, make sure you check out your eligibility for the Section 179 deduction. You must have used the truck at least 50% for business use though. It was a $100,000 tax break at one point, but was later reduced to around $25,000. This is gonna help me a lot this year. But, you may be better off using the standard depreciation method on your truck. Talk to a tax accountant. Ask other drivers in your area who they use. It will pay for itself if you miss some bigger deductions...



To avoid is legal, to evade is illegal...

 

[GAmes]

http://www3.uakron.edu/controller/PerDiem.html



The standard meal per diem is $35, but some places are more expensive. Check the website. It shows what cities are higher in each state.



To avoid is legal, to evade is illegal...

I agree with the last statement, however pub 463, page 6, paragraph titled "Amount of Standard Meal Allowance" says that most small localities rate is $31, but major cities and other localities are higher and refers you to pub 1542. So if you keep meticulous records of where you eat and if you want to spend all that time researching the different rates then go with it. I don't, so I'll just stick with the $31 a day.

 

[CSnyder]

my .02 worth

I personally pay an accountant to do my taxes and he is the kind of guy who would be a good beer drinking friend and I pay less than a $100 to get er done and end up with a nice refund. When I figured up my income to expense ratio I ended up deducting 38. 75% of my gross to expense. All I provide to my accountant is my 1099 along with a bank statement of interest paid for the year, a detailed list by month of income, fuel totals, and repairs(ie:tires, truck, trailer repairs,lights,insurance, and anything else that keeps me making money... even having my truck cleaned)... he doesn't need receipts... just the numbers but keep receipts in case of audit. Any loan papers showing value of your equipment when purchased... . he will figure depreciation for you. Also don't forget such expenses as electricity for plugging in your rig at night... it's all pro rated as to actual expense. You will find in the end that $10,000 in income after expense can be as little as $4000. I find it easiest to take my receipts every month and put them in a binder marked for that month and at the end of the year total everything for each month and put it in writing on paper to take into the tax man. Or you can buy software for your computer and enter it each night or week. Just don't be evasive. Our tax man and any other tax man that is good will only use the totals that you need to get you the best return or least amount of tax liability. I personally went to H&R Block last year and after about 30 minutes was told I owed them the cost of preparing the taxes but would receive no refund or owe in on taxes and they offered me the opportunity to go home and consider if I wanted them to file, but instead I went to an accountant and ended up getting nearly $3000. 00 back. If you have any more questions pm me