Trucking & Taxes – March/April 2021
We’re well into a new year, and it’s time for a fresh start.
Everyone makes New Year’s resolutions. Many have forgotten them by now or have moved on. In the world of taxes, there are some New Year’s resolutions you should make right now.
For all our trucker friends we recommend the following New Year’s resolutions you can make now for 2021 and keep.
Keep your books
Bookkeeping is important for all businesses, including your trucking company. Why? Bookkeeping is one of the most important activities that successful truckers should be using to their advantage. The receipts and records you keep are often in areas of your business – income tax reporting and minimization, warranty issues, maintenance information, and monthly profitability, just to name a few.
Estimated Tax Payments
Estimated taxes are necessary for self-employed individuals, sole proprietors, partnerships, and S corporation shareholders if you are expected to owe $1,000 or more in taxes. Then you need to make quarterly tax payments that cover your tax liability for the year. Always cover at least 90% of your liability to avoid penalties.
To make it simple, estimated tax payments are a means to pay taxes due on income that is not subject to withholding taxes over the course of the calendar year. Estimated payments (like all income tax payments) are pay-as-you-go over the year, but you are the one doing the withholding in the place of an employer. You’ve earned the money, and you are expected to pay the taxes on your own through estimated tax payments. Yes, the IRS requires estimated tax payments. These taxes are due each year in quarterly estimates due on April 15, June 15, Sept 15, and Jan 15, 2022.
File taxes on time
Taxpayers who don’t file on time usually end up in trouble with the IRS. Being late with your taxes or not filing them when you’re supposed to could leave you on the hook for costly penalties. First, there’s the late-payment penalty, which equals 0.5% of your unpaid tax bill for each month or partial month you owe that money, up to a total of 25%.
Then throw in the failure-to-file penalty, and it becomes even more painful. That penalty equals 5% of your unpaid tax bill for each month or partial month your return is late, up to a maximum of 25%. Yes, if you are subject to both of these penalties at the same time, you’ll effectively only be charged the failure-to-file penalty, or 5% per month. However, that is still quite a hefty tab for being late with your taxes or neglecting them altogether.
That is just the beginning. If your taxes go unfiled and unpaid for too long, the IRS can take different measures to get its money. The IRS can garnish your wages (not your entire paycheck, but a huge chunk of it). The IRS can levy fines. It also can seize your bank account assets both business and personal. Yikes.
These things won’t just happen out of the blue. You’ll first get a notice informing you of the actions the IRS intends to take. But if your taxes remain ignored, you’ll face these harsh consequences.
Not only that, but if you own a home, the IRS will have a right to put a lien on your property. This means that if you sell your home, the government will have a right to your sale proceeds. You also may have a hard time refinancing your mortgage if there’s a lien on your home.
But wait. That’s not all. By not filing your taxes and leaving the IRS hanging for its money, you could, in more extreme situations, wind up imprisoned. Talk about stress intense.
Fix your past tax problems
Now is the time to fix your tax problems. Being in debt to the IRS leads to much stress. They are after all the largest collection agency. They are also the most powerful. There are several ways to handle your IRS debt.
- Get on a payment plan with the IRS.
- If you cannot afford to pay, the IRS could grant you a temporary “currently noncollectible” status.
- Offer a compromise.
- Which is right for you? This varies from one taxpayer to another, depends on your financial situation. The first step is to analyze where you are at, what you owe and why. Then look to solve the tax issue and get a fresh start with the IRS. We offer a free consultation to help you get back on your feet and determine what may be the best solution to your tax problem. LL
This article has been presented by TruckerTaxTools.com a division of Taxation Solutions Inc., a company that has been providing income tax and bookkeeping services to the trucking industry for more than 20 years. If you would like further information, please contact the company at 877-966-2477 or visit TruckerTaxTools.com This article does not give and is not intended to give specific accounting and/or tax advice as everyone’s tax situation is different. Please consult with an expert in trucking taxes.