Updated: Jan 12
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 2021, 96% of clients used the Standard Deduction. This percentage is not expected to change due to the Standard Deduction increasing to $12,950 for single taxpayers, up from $12,550, and $25,900 for married couples filing jointly, up from $25,100.
2. You can no longer deduct charitable contributions if you take the Standard Deduction
You can no longer deduct up to $300 of qualifying charitable cash contributions. Last year you could take a charitable deduction for cash contributions made before December 31, 2021, even if you didn’t itemize. This helped lower your adjusted gross income and taxable income translating to tax savings. In 2022, only taxpayers who itemize their deductions are entitled to a charity deduction.
3. Form 7202 has expired for those who were unable to work or had to care for a family member due to COVID-19
Form 7202 was used to calculate the amount a self-employed individual could claim for Qualified Sick and Family Leave equivalent credits under the Families First Coronavirus Response Act (FFCRA). Self-employed individuals could use this form if they were unable to work or had to care for a family member for reasons related to the coronavirus. This COVID credit has expired and is no longer available for any taxpayer.
4. There was no stimulus check or Recovery Rebate Credit in 2022
You were 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. However, there were no stimulus checks issued in 2022.
5. Don’t miss out on the QBI Deduction
77% of owner-operators received a QBI Deduction for 2021 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 $7,700. 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 reverted back to $2,000 per child under the age of 17. In 2021, the credit was $3,600 for each child under age 6 and $3,000 for each child aged 6 to 18. Additionally, 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. As of this writing, it does not appear that an advanced tax credit will be available for 2022.
7. Don’t Wait!
The most important aspect of tax time is paying tax due by April 15th. For self-employed individuals, quarterly tax payments are critical to the process of paying tax in full by April 15th. Extensions can be provided for additional time to file, however, extensions are not available for deadlines to pay your taxes. Organize and send all your tax documents as early as possible to get a head start on filing.