If you’re a truck driver, you know how hard it is to keep track of your expenses, income, and taxes. You have to deal with different state laws, fuel taxes, per diem rates, and deductions.
You also have to file your tax returns on time and pay the right amount of taxes to avoid penalties and audits from the IRS.
But don’t worry; we’re here to help you with some tax tips for truckers that can save you money and hassle. In this article, we’ll cover some of the most common tax withholding mistakes that truckers make and how to avoid them.
What Is Tax Withholding and Why Is It Important?
You may have noticed that your employer takes out some money from your paycheck throughout the year and pays the IRS on your behalf. This is called tax withholding.
It covers your income tax, Social Security tax, Medicare tax, and any other taxes that you have to pay. Tax withholding is important because it helps you avoid underpaying or overpaying your taxes at the end of the year.
The IRS may charge you penalties and interest if you pay less taxes than you owe. If you pay more taxes than you need, you may lose the chance to use or invest your money in other ways.
How much money they withhold depends on different things, such as:
- How much money you make
- How you tell the IRS about your taxes (for example, if you are single or married)
- How many people depend on you for money (for example, your children or your parents)
- What kind of tax benefits you can get (for example, if you have a mortgage or donate to charity)
You can use the IRS Tax Withholding Estimator to find out how much tax withholding you need.
Common Tax Withholding Mistakes for Truckers and How to Avoid Them
Here are some of the most common tax withholding mistakes that truckers make and how to avoid them:
1. Not Updating Your W-4 Form
Your W-4 form is the document that tells your employer how much tax withholding you want from your paycheck.
You should fill out a new W-4 form whenever you have a change in your personal or financial situation, such as getting married, having a child, buying a home, or starting a side business.
If you don’t update your W-4 form, you may end up with too much or too little tax withholding.
For example, if you get married and don’t increase your allowances on your W-4 form, you may have too much tax withholding and get a large refund at the end of the year.
On the other hand, if you have a child and don’t decrease your allowances on your W-4 form, you may have too little tax withholding and owe money to the IRS.
To avoid this mistake, you should review your W-4 form at least once a year and make any necessary changes. You can use the IRS Tax Withholding Estimator to help you fill out your W-4 form correctly.
2. Not Claiming All Your Deductions
As a truck driver, you may be eligible for many deductions that can lower your taxable income and reduce your tax bill. Some of these deductions include:
Per diem
This is the amount of money that you can deduct for meals and incidental expenses while traveling away from home for work. The IRS sets a standard rate for per diem, which varies depending on where you travel.
Most places in the continental U.S. have a standard rate of $66 per day for 2023, while most places in Alaska, Hawaii, and other areas outside the continental U.S. have a standard rate of $71 per day.
Mileage
This is the amount of money that you can deduct for the miles that you drive for work-related purposes.
The IRS sets a standard mileage rate for business use of a vehicle, which changes every year. For 2023, the standard mileage rate is 58 cents per mile.
Other expenses
These are any other expenses that are necessary and ordinary for your work etc.
As a truck driver, some examples are tolls, parking fees, uniforms, cell phone bills, tools, equipment, supplies, licenses, fees, and insurance premiums. To avoid missing out on these deductions, you should keep track of all your receipts and records throughout the year. You can use an app like QuickBooks Self-Employed or Everlance to help you organize your expenses and mileage.
3. Not Paying Estimated Taxes
If you’re an independent contractor or self-employed truck driver, you may have to pay estimated taxes every quarter.
Estimated taxes are payments that you make to the IRS in advance of filing your annual tax return. They cover your income tax, self-employment tax (Social Security and Medicare), and any other taxes that you owe.
If you don’t pay estimated taxes or pay too little estimated taxes, you may face penalties and interest charges from the IRS. You may also have a large tax bill at the end of the year, which can hurt your cash flow and budget.
To avoid this mistake, you should calculate your estimated taxes using Form 1040-ES, which has a worksheet and payment vouchers.
You can also use the IRS Tax Withholding Estimator to help you figure out your estimated taxes. You should pay your estimated taxes by the following due dates:
- April 15 for the first quarter
- June 15 for the second quarter
- September 15 for the third quarter
- January 15 of the following year, for the fourth quarter
You have four different ways to pay your estimated taxes: online, by phone, by mail, or in person. Visit the IRS website to learn more about each method.
Conclusion
Tax time can be stressful and confusing for truck drivers, but it doesn’t have to be. By avoiding these common tax withholding mistakes, you can save money and avoid trouble with the IRS.
Remember, you’re not alone in this journey. You can always seek help from a tax professional who understands the trucking industry and can guide you through the process.
Happy trucking! 🚚
