Updated: 5 days ago
Every year there are changes to tax laws that may go under the radar for some 1099 truck drivers. Not knowing what these changes are may cause people to miss out on significant savings when it comes time to file their taxes. That's why we wanted to provide a few pieces of advice to make sure you aren't making the same common mistakes other owner-operators are making.
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1. The Standard Deduction increased again, make sure to take it if it’s greater than your Itemized Deduction
In 2020, 94% of clients used the Standard Deduction. We are expecting to see that percentage increase due to the Standard Deduction increasing to $12,550 for single taxpayers, up from $12,400, and $25,100 for married couples filing jointly, up from $24,800
2. You can now deduct some charitable contributions even if you take the Standard Deduction
You can now deduct up to $300 of qualifying charitable cash contributions. Even if you don't itemize, you can take a charitable deduction for cash contributions made before December 31, 2021. This will help lower your adjusted gross income and taxable income translating to tax savings. In 2021, this has been adjusted to $300 per taxpayer, so if you are Married Filing Jointly it’s a maximum deduction of $600.
3. Don't forget about Form 7202 if you were unable to work or had to care for a family member
Form 7202 is used to calculate the amount a self-employed individual can claim for Qualified Sick and Family Leave equivalent credits under the Families First Coronavirus Response Act (FFCRA). Self-employed individuals can use this form if they were unable to work or had to care for a family member for reasons related to the coronavirus between January 1, 2021 and March 31, 2021.
4. Check if you qualify for a Recovery Rebate Credit
You may be able to take this credit if you didn’t receive an EIP (Economic Impact Payment) or your EIP was less than the full amount for you and each qualifying child you had in 2021. The credit is figured in the same manner as the EIP you may have received in 2021 except your 2021 tax information will be used to figure the credit. This credit will also impact taxpayers that had a child born during 2021.
5. Don’t miss out on the QBI Deduction
68% of owner-operators received a QBI Deduction in 2020 because they had a net profit. If a business operates at a loss for the year, a QBI Deduction can't be claimed. The average amount of deduction received was $6,200. As an owner-operator, chances are you will qualify for this deduction, so if you didn't take this deduction last year make sure you look into it this year.
6. Make sure to accurately calculate your Child Tax Credit
The Child Tax Credit increased from $2,000 to $3,600 for each child under age 6 and to $3,000 for each child 6–17. Rather than waiting until tax time for families to claim this credit, the IRS began sending out a portion of the credit through advance monthly payments. Remember that by taking the advance Child Tax Credit payments, you have reduced the amount you will get at tax time.
7. Don’t Wait!
Don't wait until the last minute to start filing your taxes. Filing your taxes, especially as an owner-operator, can be a long process. Don't risk being late, which could lead to fines and additional waiting time for your refund, due to the fact that you could run into issues while preparing your taxes. Even if you can't pay your taxes, make sure you at least file!