A casual glance at the calendar indicates that tax season is here. As truckers begin the annual custom, one expert asserts that the most common error drivers make when it comes to submitting… is failing to file at all.
Taxes were the focus of the March 9 program of “Live From Exit 24.” Mike Matousek, the host, and Lewie Pugh, executive vice president of the Owner-Operator Independent Drivers Association, highlighted some of the difficulties truckers confront during tax season.
Barry Fowler, CEO of Houston-based Taxation Solutions and author of Land Line Magazine’s “Trucking and Taxes” column, joined the trio to lend his expertise. He believes the most common error he sees truckers make when it comes to tax preparation is failure to file.
According to Fowler, some drivers are unprepared for the expenses associated with self-employment. Drivers who fail to make projected tax payments, among other prepared actions, may find themselves in a difficult situation very quickly.
“You were unprepared for that tax, and then it snowballs,” Fowler explained. “‘I did not file my tax return for this year. I never received a letter from the IRS. I do not file the subsequent one because the IRS will discover that I am earning money.’ It simply transforms into a large snowball going downhill. And by the time the IRS catches up with you two or three years later, you owe $100,000 or $200,000 and are in serious financial trouble.”
Another frequent blunder
Pugh and Fowler concur that another frequent economic error made by truckers is purchasing equipment to avoid paying taxes. A section 179 deduction “entitles a taxpayer to claim as an expense the cost (or a portion of the cost) of any property in the taxable year in which the taxpayer sets the item in service.” While this may sound enticing, Fowler points out that each driver’s circumstances are unique, and what makes sense for one driver may not make sense for another.
“It has to make economic sense. I am a successful businessman. You can spend $100,000 on a truck and claim bonus depreciation on it, thereby making it a $100,000 write-off. However, if you are in the 15% tax rate, you save $15,000 but lose the remaining $85,000,” Fowler explained. “And if you didn’t require it, you’re out the entire $100,000.” It served no purpose. However, if the equipment is truly necessary and the time is right, we look at the best approach to depreciate it to ensure that we maximize the depreciation.”
According to Fowler, it is critical to seek tax assistance from someone who understands the trucking sector and how to best benefit truckers. Pugh believes that continuity is also critical when making a decision.
“What I’ve noticed is that when your connection with your tax preparer develops – and you continue to work with the same one – you tend to progress toward the future. It assists you in making future decisions, whether they include purchasing or not purchasing equipment, retirement, or other such matters,” Pugh explained. “When you have a solid working connection, when you know and understand one another, he understands your goals and assists you in achieving them.”
Additional Resources for Motorists
Truck to Success is a three-day intensive training developed by OOIDA to assist prospective and existing owner-operators in achieving greater success in the trucking industry. On Saturday, March 26, during the Mid-American Trucking Show in Louisville, Ky., the Association will present a 90-minute preview of the course. Fowler and Pugh will instruct the course, which will emphasize taxation and corporate structure.
Throughout MATS, Fowler and members of his staff will be on hand to meet truckers and answer their questions.
The broadcast is available via the “Live From Exit 24” website, the OOIDA Facebook page, the OOIDA YouTube channel, iHeartRadio, and Apple Podcasts. The show’s website maintains an archive of previous episodes.
A Survey Titled ‘life From Exit 24’
“Life From Exit 24” was launched as a means of increasing OOIDA’s communication with members and hearing directly from industry drivers.
OOIDA is asking truck drivers to complete a survey expressing their initial impressions of the show. The survey is available here. LL
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