Tax expert warns truckers not to make this common mistake

March 10, 2022

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A quick check of the calendar lets you know tax season is upon us. As truckers begin the yearly tradition, one expert says that the biggest mistake drivers make when it comes to filing… is not doing it at all.

The March 9 episode of “Live From Exit 24” was all about taxes. Host Mike Matousek and Owner Operator Independent Drivers Association Executive Vice President Lewie Pugh discussed some of the concerns truckers face during tax season.

Barry Fowler, founder of Houston-based Taxation Solutions and author of the “Trucking and Taxes” column for Land Line Magazine, joined the pair to offer his expert advice. He says the biggest mistake he sees from truckers when it come to them handling their taxes is failure to file.

According to Fowler, some drivers aren’t ready for the expenses that come with being an owner-operator. Drivers who fail to make estimated tax payments, among other preparatory measures, could soon find themselves in a bad situation.

“You weren’t prepared for that tax, and then it becomes a snowball effect,” Fowler said. “‘I didn’t file this year’s return. The IRS never sent me a letter. I don’t file the next one because then the IRS is going to know I’m making money.’ It just becomes a big snowball rolling downhill. And by the time the IRS catches up with you two or three years later, you’re owing 100 or 200 thousand dollars, and you’re in a lot of trouble.”

Another common mistake

Both Pugh and Fowler agree that another common economic mistake made by truckers is buying equipment to save money on taxes. A section 179 deduction, “allows a taxpayer to elect to treat the cost (or a portion of the cost) of any property as an expense for the taxable year in which the taxpayer places the property in service.” While this can be appealing, Fowler says each individuals’ circumstances are different, and what makes sense for one driver may not for another.

“It’s gotta make business sense. I’m a business man. You can spend $100,000 on a truck and you can take your bonus depreciation on it and it’s a $100,000 write off. But if you’re in a 15% tax bracket, it saves you $15,000, and you’re still out the other $85,000,” Fowler said. “And if you didn’t need it, you’re really out the full $100,000. It didn’t do you any good. But if you actually need the equipment, and it’s the right time to do it, we look at the right way to depreciate it to make sure we’re maximizing the depreciation.”

Fowler says that when looking for tax help it is important to find someone who knows the trucking industry and how to best benefit drivers. Pugh thinks that continuity is also important when it comes to your decision.

“The thing I learned, as you grow your relationship with your tax preparer, and having the same one – you kind of grow toward the future. It helps you make future decisions, whether it’s buying equipment or not buying equipment or retirement and stuff like that,” Pugh said. “When you have a good working relationship, you know each other and understand each other, he knows your goals and helps you get there.”

Other resources for drivers

OOIDA’s Truck to Success is an in-depth three-day course designed to help new and current owner-operators achieve greater success in the trucking industry. The Association will offer a 90-minute sample of the course on Saturday, March 26, at the Mid-American Trucking Show in Louisville, Ky. Fowler and Pugh will lead the course, which will focus on taxes and business structure.

Fowler and some of his team will be on hand throughout MATS to meet truckers and answer their questions.

Listeners can tune in to the show on the “Live From Exit 24” website, OOIDA Facebook page, OOIDA’s YouTube channel, iHeartRadio and Apple Podcasts. Past episodes are archived on the show’s website.