TaxConnections has a wide range of tax professionals with tax specialties. One of our members specializes in taxes for truckers, limo drivers and rideshare drivers. They are all taxpayers in the profession of transportation. When I interviewed TaxConnections Member Daniel Farmer, he told me he has enjoyed a lifelong interest in trucking and transportation. Daniel currently works out of Clearwater, FL where he manages an accounting practice serving small to medium size businesses. In fact, when Dan told me he has a collection of trucks I asked him to share it with us. 

Kat: When someone is transporting across state lines are they required to file a tax return in all the states they are driving through?

Dan: No, a tax return only needs to be filed in the state that you where you reside.

Kat: What is the best way to track business miles traveled?

Dan: The best way to audit proof transportation miles is to use MileIQ Business Miles Tracker App. For truckers, log books can also be used.

Kat: How much can a transportation driver write off on meals away from home?

Dan: Taxpayers in the transportation are subject to the U.S. Department of Transportation hours of service rules are allowed a deduction of 80% for meals from their income, compared to the general 50% limitation. This includes individuals working on an airplane, barge, bus, ship, train or truck. Either actual costs of meals or the special standard meal allowance for the days away can be deducted. Log and expense books can be used to document and count the number of days traveling.

Kat: Are lodging expenses are tax deductible when you are a taxpayer in the profession of transportation?

Dan: Lodging expenses are deductible; however there is no standard amount so a receipt is required for each lodging expense. Laundry expenses incurred from coin operated machines will probably not provide a receipt, but would be deductible is recorded in an expense ledger or notebook.

Kat:  In the transportation profession, what are good examples of deductible expenses?

Dan: Expenses that are both ordinary and necessary to the job are generally deductible. For truckers, items like log books, maps, gloves, CB radios, straps, flares, satellite radio, safety and weather gear are examples of expenses. Receipts are required, however, if  the expense is less than $75 an expense ledger or notebook can be used if kept on a timely basis.

Kat: What is the biggest challenge faced by taxpayers in transportation when filing their tax returns?

Dan: Tracking income is the biggest challenge faced by those in the trucking and transportation business. It is every transportation drivers responsibility to report their income and business deductions. We generally see many issues around income declared on a Form 1099 that is more than the amount received during the year. This occurs because a payment is made very late in December and received in the mail in January.

Kat:  How does a transportation driver pay my taxes during the year if they are always on the road?

Dan: Making quarterly estimated tax payments is required by the I.R.S. and is easier because the payments would be smaller. In addition, there are penalties accessed for not making the quarterly payments.

Kat: What if I do not have the money to pay taxes, should I still file?

Dan: Most definitely. Not filing a return because taxes are owed only compounds the problem.  The penalty for filing late is higher then the penalty for underpaying taxes. Not filing will result in the I.R.S. preparing a return for you based on the income reported to them without any deductions for expenses resulting in a much higher liability.

Kat: What if there are mistakes in returns that have already been filed?

Dan: It is possible to correct prior returns if there are errors, such as additional expenses that were not previously deducted. However, there is a time limitation on filing an amended return.

Kat: What is the biggest issue with the ride share industry?

Dan: One of the biggest issues is the determination of the classification of drivers. Three key factors are behavioral control, financial control, and the contractual relationship.

If you have trucks and offer services that transport products or people, you will want to reach out to Tax Advisor Dan Farmer at 954.457.0699.