As an independent truck driver, you are responsible for filing your own tax returns. Understandably, it may be overwhelming, if not confusing, because of the many elements and items that must be factored in.
However, with proper research and careful understanding, you should be able to file your taxes as an independent contractor promptly and accurately. From tax liabilities to common truck driver tax deductions, here are some of the most important tax laws you should be aware of.
Liabilities
Your main liability is the self-employment tax. The standard rate is 15.3%, comprising your Social Security contribution at 12.4% and Medicare taxes at 2.9%.
Then, there’s the Federal Income Tax as well as the State Income Tax, both of which will be computed from your tax return.
You should make quarterly payments as a self-employed individual if your taxes will be at least $1,000.
Also, because you are basically self-employed, it will be your responsibility to pay your tax dues on time. Unlike employees, your taxes won’t be automatically withheld or paid by an employer.
New independent contractors can estimate their quarterly taxes using the actual estimate method. In this method, your computation would be based on the current annual profit of your business.
This way, it’s easier for you to prepare for the tax you’ll need to pay upon the quarterly due, and you’ll avoid getting surprised too.
Deductions
Aside from the liabilities, you should also take note of the truck driver tax deductions you can file. These can help a great deal in easing your tax liabilities.
The most important thing you should take note of is that an item is determined as being tax deductible depending on how standard and necessary it is for your line of business. This goes without saying that you need to be able to show proof of these expenses, which is by way of receipts.
So be careful handling your receipts, especially if they’re related to your business operations or management. Back it up, if you can, to safeguard your records. The more complete your documentation is, the better your tax filing will go.
Examples of common truck driver tax deductions include association dues, mobile devices like computers and mobile phones, clothing or uniform expenses, continuing education or professional certifications (i.e., CDL license), tools and equipment, and office expenses.
Traveling is also a natural part of the job of truck driving, so any accommodation costs incurred, including meals, parking, and even toll fees can be claimed as a deductible. Even personal products that can be said to help in the performance of duties can also be listed as a deductible.
Stay on top of your tax liabilities while at the same time making the most of your deductibles. Keep an accurate record of your expenses as an independent contractor so you don’t need to deal with bigger problems come tax season.