Trucking & Taxes – March/April 2022

Most taxpayers fear the dreaded Internal Revenue Service and think of the agency as a foe.

That fear is understandable since the IRS is probably the largest collection agency in the world with some awesome powers of collection.

The IRS can put liens on your property, equipment and income. It can levy your bank account and garnish your wages. It has awesome powers. Yes, I said awesome. Wouldn’t you like to possess those kinds of powers to collect on your invoices?

But that power can also create a lot of fear if you are one of millions that owe the IRS money or have not filed a tax return. And even if you have done everything right, you could still end up on the wrong side of an audit.

Does that mean the IRS is a foe?

The IRS can certainly become a foe if you owe money or have not filed. But it also can be a friend and set up an installment agreement to help you give it its money. It also (if you can get through and connect to an experienced agent) will answer tax questions and interpret tax law.

We all know that the IRS is a necessary evil. Without the IRS nobody would voluntarily file taxes or, for that matter, pay taxes.

So what do we do? Do your best to stay out of trouble with the IRS by filing your taxes correctly and on time. Most important, pay your taxes.

That all starts with good record keeping.

Many truckers don’t want to incur the costs, so they try to go at it alone, choose the least expensive service or just fail to do any bookkeeping at all.

Be sure to choose a good bookkeeping service that knows trucking. Make sure that the company follows through with the bookkeeping and that you see financial reports at least quarterly, if not monthly.

Are they asking questions about your business? Do you have a new truck or new trailer?

We at TruckerTaxTools sometimes irritate our clients because we ask questions most don’t. However, we do that because we know trucking and what is most often missed and overlooked regarding deductions.

For filing taxes, it also helps to hire a professional who knows trucking. Make sure they are a licensed professional and have a good track record.

When the IRS becomes a foe

First, don’t panic. There is help. You do have a right to representation in dealing with the IRS. Second, thoroughly read the IRS letter. It may not be all that bad. But by not reading it closely, it can get worse. Third, deal with the issue before it gets worse.

The IRS is there to collect for the government, not to make sure that you can afford to make the payments. The IRS is looking for 100% collection of the debt you owe as soon as possible. Yes, you can get a payment plan, but can you afford what the IRS wants?

The IRS can give you a lower payment, but only if you can prove that you cannot afford the full pay plan. This requires disclosure of financial information. If you are an owner-operator, that means a financial statement.

There’s another place good bookkeeping helps. The IRS will require you to provide forms, such as a Form 433a and/or 433b. Dealing with the IRS can get complicated, and, remember, their only job is to collect debts due to the federal government.

Can I settle for less?

Commercials say I can settle for less than I owe. Does that apply to me?

Those commercials could be correct, but everyone’s situation is different, and the IRS looks at your financial situation differently than you do. To determine if you qualify, you need to stop and ask yourself several questions.

Do I have the income to pay the debt?
Do I have assets to pay for the debt? Equity in a home? Retirement accounts? Investment Accounts? Vehicles?
Is my income going up over the next year?

All this is used to determine what you can pay or settle for.

For the IRS to determine if you qualify, you must file Form 656 Offer in Compromise along with the required support documents. An offer in compromise is an offer to settle your tax debt based on your ability or inability to pay over the collection period of the debt. This takes about 12 months for the IRS to determine if you qualify. Make sure that the submission is complete and that you know all the rules because the IRS will return incomplete offers and make you start over.

Even if you qualify, this may not be the right answer for you to pay your IRS debt. Make sure that you know your options. Some options include “currently uncollectible” status, partial pay installment agreements, and penalty abatement.

It is always best to have a professional on your side to determine which option is best for you.

One of the best parts of having a professional working for you is that you never have to talk to the IRS.

If you choose to go it alone, you need to know that every taxpayer has rights, and you should know your rights when dealing with the IRS.

It’s called the Taxpayer Bill of Rights

The right to be informed.
The right to quality service.
The right to pay no more than the correct amount of tax.
The right to challenge the IRS position and be heard.
The right to appeal an IRS decision in an independent forum.
The right to finality.
The right to privacy.
The right to confidentiality.
The right to retain representation.
The right to a fair and just tax system.

What we do know for sure is that the IRS can be frightening. Owing the IRS is downright dreadful. When you have IRS problems, it affects your whole life with stress and strains on the family. The IRS letters never stop. IRS liens and levies can devastate your life. Get ahead of the problem before the IRS is not just your foe but becomes a monster collection agency that takes everything.

Also, put yourself and family at ease and hire a professional to represent you. LL

This article has been presented by TruckerTaxTools.com, a division of Taxation Solutions Inc. – Tax Relief. Barry G. Fowler, EA, president of Taxation Solutions, has been providing IRS tax debt resolution and bookkeeping services to the trucking industry for more than 21 years. If you would like a free consultation, contact them at 877-966-2477. Their website is 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 at TruckerTaxTools.com, the leader in trucker taxes.