For some company drivers, a change in tax law cost them thousands of dollars.
Scott Sargent was shocked when he saw the results of his tax returns this year. Same goes for Stuart Hochfelder.
The two company drivers witnessed a swing of several thousand dollars after the Tax Cuts and Jobs Act of 2017 eliminated employee drivers’ ability to deduct 80% of up to $63 in daily expenses for meals on the road. The change didn’t affect owner-operators or leased drivers.
Sargent, an OOIDA life member from Holmen, Wis., said he usually received a refund in the range of $1,100 to $1,500. This year, he and his wife had to pay $5,600 to the federal government.
“I was completely blindsided by it,” said Sargent, who noted that a change in his wife’s employment played some role in the tax swing.
Hochfelder, an OOIDA life member from Bourbonnais, Ill., said he usually pays the federal government $300 to $500. This year, his bill amounted to $7,125.
“With the tax cut, I knew I was going to run into a payment to the IRS,” Hochfelder said. “I didn’t know how deep it was until we did the final numbers.”
For Sargent’s 63rd birthday in March, his wife bought him a brand new Indian Motorcycle.
“She took out a loan to buy it for me,” he said. “The day before that bike was about to be delivered to my house, my accountant called, and I found out how much we owed on our taxes. I desperately wanted to call the dealer and tell them to take the bike back, because I couldn’t afford it. But my wife talked me out of it and said that I deserved something for my hard work.”
Still, the tax hit hurt.
“We had to take almost half the money out of our general savings account to pay that tax bill,” Sargent said. “We had to scrap our vacation plans to see my wife’s daughter in Seattle.”
The tax bill also took its toll on Hochfelder.
“It had a huge impact on my personal savings and retirement, having to come up with that kind of money,” he said.
The two OOIDA members aren’t alone. The majority of the nation’s 3.5 million truck drivers are company drivers.
Jay Grimes, OOIDA’s director of federal affairs, said the Association has heard from other drivers hit by as much as $5,000 this year.
“Now that we’ve passed the April tax deadline, we know that it’s hitting many company drivers in a bad way,” he said.
Under previous tax law, it wasn’t uncommon for a truck driver to receive a reduction of $15,000 or more in taxable income by using the per diem tax deduction. The new tax bill doubled the standard deduction, but for many drivers it didn’t equate to their old deduction.
“We understand increases to the standard deduction for individuals and married couples filing jointly were designed to reduce the tax burden for most Americans, including employee drivers,” OOIDA President and CEO Todd Spencer wrote in a letter to lawmakers in January. “However, the per diem deduction for meals could total well over the standard deduction of $12,000 for a driver who spends 250 days on the road annually – a working schedule that is not uncommon in our industry.”
Rep. Kevin Brady, R-Texas, who is the chairman for the House Ways and Means committee, told the Huffington Post that he expected trucking companies to reimburse their drivers who were negatively affected by the change.
“We feel like they should be picking up those expenses of their employees on the road,” Brady said.
OOIDA’s Grimes, said employee drivers probably shouldn’t hold out much hope for that theory.
“This isn’t something we’re really expecting these companies to do,” Grimes said.
“It (tax change affecting company drivers) seems like somewhat of an oversight that could easily be fixed.”
Grimes added that he encourages company drivers to reach out to their lawmakers to let them know about how this change has affected you.
In April, Rep. Conor Lamb, D-Pa., introduced the Tax Fairness for Workers Act, or HB2103, which would “amend the Internal Revenue Code of 1986 to allow an above-the-line deduction for union dues and expenses and to allow a miscellaneous itemized deduction for workers for all unreimbursed expenses incurred in the trade or business of being an employee.” A companion bill, S1026, was introduced by Sen. Robert Casey Jr. on the same day.
The Senate version was referred to the Committee on Finance, and the House bill was referred to the Committee on Ways and Means. As of early June, the House bill was up to 15 co-sponsors, while the Senate version had 16.
OOIDA has been attempting to make lawmakers aware of how the tax change would affect truck drivers since the beginning of the year.
“As you consider additional modifications to the tax code during the 116th Congress, we encourage you to explore this matter in greater detail to ensure company drivers aren’t being negatively impacted by reforms that were designed to benefit blue collar Americans,” OOIDA wrote in its letter to lawmakers in January. “The per diem deduction was a popular tax provision among these drivers.”
Until a change is made to the law, Sargent said he’s trying to prepare for next year’s taxes.
“Because I didn’t find out how bad it would hit me until March, I lost three months of prepping for next year’s taxes,” he said. “Hindsight is always 20/20. I guess I should have done a better job getting ready for these changes last year. I would have had the same bill either way, but maybe I wouldn’t have bought a bike.
“I knew there was going to be a change, but I wasn’t expecting that big of a swing. I didn’t expect it to be a good used car’s worth of money.” LL
Land Line’s Greg Grisolano and Land Line Now’s Terry Scruton contributed to this report.