Trucking & Taxes – March/April 2023
It’s difficult to believe that another year has passed, and the time for the 2023 Mid-America Trucking Show in Louisville, Ky., is almost here.
The show will be March 30-April 1, and we will be at booth 40448 in the north lobby of the Kentucky Exposition Center. First, stop by for some real country music, and then be sure to stick around to talk to us about your bookkeeping and taxes. Dave Gore of Keeping it Country Live, Taylor Barker and many artists from Nashville will be there.
Don’t overpay
As I said, another year has gone by. Now, it’s time to do some planning to make sure you are not paying more than you should in taxes.
Taxes and bookkeeping are the bedrock of your business. Your budgeting and planning for your business should start here each and every year.
Did you know the biggest mistake you can make for taxes besides not filing? Failing to plan.
Do you really want to pay more taxes than you legally have to?
Bookkeeping is the foundation of running your business as an owner-operator. It allows you to keep your financial information organized and gives you an idea of how your business is performing.
A good bookkeeping service will help keep track of your profits and losses, tax estimates, financing agreements, and lease agreements.
Good bookkeeping also will give you the resources to budget and plan your taxes.
A reliable tax and bookkeeping service can help your trucking business streamline recordkeeping and taxes.
Without reliable bookkeeping
- You miss deductible business expenses, and you pay more in taxes.
- Incomplete bookkeeping can cause you to overpay in taxes.
- Not reading your settlement statements. It could cost you money through overstated income, added deductions, or incorrect expenses or missed deductions.
- Bookkeeping done by those who don’t know trucking, it could cause you to miss crucial tax deductions for owner-operators.
- Bookkeeping done by those who only care about their bottom line and not your profit without regard to your business.
You can do it yourself
When we talk about DIY bookkeeping at the OOIDA Foundation’s Truck to Success seminar, we like to say to keep it simple with bookkeeping by:
- Saving every receipt
- Open a separate checking account used exclusively for your business
- Use a separate credit card for business expenses
- Save your log books (a printout from your ELD)
- Get a notebook to carry with your receipt envelope
- Save the loan agreements and read them
- Save the purchase order for equipment and record the price correctly
- Save your records in case of an audit
Great bookkeeping helps you
- Make proper estimated tax payments
- Keeps you from paying too much or too little in taxes
- Keeps you prepared in case of an IRS audit
- Helps you figure your cost per mile
Flying blind in any business is a mistake. Yes, just a few years ago you could get by just running and you end up making some money. Now, as costs increase it gets harder and harder to make money in the trucking business. A few years ago, fuel prices, truck prices, maintenance costs and supply costs were much lower than today. Not to mention income per load was higher and that is even down compared to the rising costs. This all makes knowing your cost per mile even more important.
Your bookkeeping just became even more important than just for tax purposes.
Once you know what your costs are, you can start taking steps to control those costs, which will have a direct impact on your bottom line.
Cost for operating a truck fall under two general categories: fixed and variable costs.
Fixed costs
These are costs you will have regardless of if your truck is parked or if it is rolling. Examples include loans, lease payments, insurance, permits, bookkeeping and tax services. Knowing your fixed costs allows you to know what your costs will be even if you don’t run your truck.
Variable costs
Expenses that are directly related to operating the truck. These include fuel, maintenance and repairs, tolls, scales, meals, telephone, truck wash and any other expenses you are deducting. You can control some of these variable costs.
Figuring your cost per mile
Figure fixed cost per mile by taking total fixed cost divided by miles driven. Then do the same for variable costs. This will give you what it costs to run your truck per mile.
Now that you know your cost, how much do you want to make? You can use this tool to help calculate your earnings per mile. For every load, you can look to see how much you made taking the load income divided by the number of miles to get income per mile less the amount of fixed and variable cost per mile to get your net income per mile. Now you know your net income per mile.
You can use this to help predict your income based on miles to be run. It’s also a great way to see what happens when you increase or decrease variable costs or even what happens when you increase fixed costs by buying a new truck or paying off a truck loan.
The OOIDA website states, “As a general rule of thumb, the driver should earn about 30% of the total gross revenue of the truck. If your actual gross income was less than what is on the sheet, your driver’s income is the difference between actual gross income and total vehicle costs. If it is less than 30% of the gross, you need to take steps to control your expenses or raise the gross, probably both.”
We love this cost-per-mile calculation tool provided by OOIDA.
As you can see, bookkeeping is important to providing savings.
Bookkeeping is also important to finding every tax deduction possible to help reduce taxes.
Taxes are one of the largest burdens for the self-employed. In taxes, if you just simply take into account self-employment taxes at 15.3% of net income from business, plus your federal and state income taxes you’re potentially saving 25% to upwards of 51% on taxes. Every dollar saved on your taxes is a dollar you keep.
Why pay more than you legally have to? Bookkeeping provides you savings or ways to save on your taxes and also in your business identifying ways to reduce costs. Use of tools such as the cost per mile calculation helps you to find more ways to make more money.
Don’t delay. Get started today keeping track of your business. 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.