Taxes for Owner-Operator Truck Drivers

Updated: 5 days ago

As an owner-operator truck driver, your tax situation is unique. You file and pay taxes like a business owner while also being eligible for deductions that are specific to truck drivers.

If you’re looking for more information on how to file and pay taxes as an owner-operator truck driver, we’re here to help. Below is a brief overview of how to handle and manage owner-operator taxes.

Are you a self-employed truck driver that needs help with your taxes, accounting, or bookkeeping? Click here!

Quarterly Tax Estimates

As an independent contractor, the Internal Revenue Service (IRS) requires you to make quarterly estimated tax payments based on your business profits. Your quarterly estimated tax payments include self-employment tax, federal income tax, and state income tax. The self-employment tax consists of Social Security and Medicare taxes. When you are self-employed the payment of Social Security and Medicare taxes is your responsibility. This is unlike those individuals who are classified as an employee as these taxes would be withheld from a paycheck and paid by an employer.

How can you estimate your taxes owed each quarter? There are two common methods for estimating tax:

  • Safe harbor: Slightly simplified, this method is calculated by dividing your prior year's tax liability by four to arrive at the amount to pay for each quarterly tax estimate.

  • Actual estimate: This method is a far more useful method to calculate quarterly tax estimates for those with fluctuating income. This method uses the business’ current year profit each quarter to calculate the amount to pay during each quarter. This ensures that you are keeping current with tax payments during your business’ growth throughout the year and prevents any surprises during tax filing.

For new independent contractors, it is recommended to use the actual income method for estimating quarterly taxes.

Put time aside on your calendar each quarter to work through tax estimates. Do not wait until the last minute as penalties can apply.

Tax Deductions and Credits Lower Tax Liability

When it comes time to file your taxes, you can minimize your tax liability by claiming every legal tax deduction and credit available. Understanding and recording all the deductions and credits appropriately will help you avoid penalties, reduce the risk of an audit, and minimize the amount you have to pay in taxes.

Tax Deductions

A tax deduction occurs when you have a reduction of taxable income, like an expense. The reduction of your taxable income results in less tax due.

As an owner-operator truck driver, you have numerous tax deductions for your business including your truck payment, fuel, accounting and bookkeeping fees, and more.

For our list of commonly missed owner-operator truck driver tax deductions, check out our Tax Deductions for Truck Drivers List.

Tax Credits

Tax credits work very differently than tax deductions. Tax credits will reduce your tax liability dollar-for-dollar while tax deductions reduce your taxable income.

This means if you owe $5,000 in taxes and receive a $4,000 tax credit, you will only be responsible for paying $1,000 in taxes.

Reduce the Risk of Audit on Your Business

The IRS is tasked with selecting taxpayers for audit in two ways: The first is if they suspect dishonesty or practices that do not adhere to tax law; the second is a random selection of tax returns for audit to check tax compliance. To reduce the likelihood of a tax audit and reply to a random audit, it is important to claim tax deductions and tax credits for which you have documentation and support. Without supporting documents, the IRS may disallow the deductions or credits and charge interest and penalties.

Keep receipts, canceled checks, electronic log books, and other valid proofs of payment documentation for a minimum of three years.

Additional Taxes

Employee Tax

Do you have employees working for your business? If so, you must collect taxes on behalf of your employees including:

  • Social Security

  • Medicare

  • Federal and state income tax

The amount of taxes to withhold from each employee’s wages starts with a calculation that begins with the employee’s Form W-4. The Form W-4 is prepared by the employee and provided to the employer. The taxes calculated and withheld from an employee’s paycheck must be sent to the federal and state government based on their specific rules.

Excise Tax

Excise tax is considered an indirect form of taxation because the government does not directly apply the tax during the income tax filing process. An intermediary, either the producer or merchant, is charged and then must pay the tax to the government.

Excise tax can apply to businesses in a variety of ways based on your industry, the product or service you provide, and where you operate your business. A couple of common excise taxes that apply to trucking are:

  • Form 2290 Federal Highway Use Tax (FHUT)

  • Diesel Fuel

  • Tires

Purchases made on specific types of consumables or goods (such as fuel) and certain activities (such as a truck using a highway) are subject to excise taxes.

Franchise Tax

Franchise taxes are paid by certain entities (corporations, partnerships, and limited liability companies) that do business in certain states. These may be considered “privilege” taxes as it allows a business the right to operate in a certain state or locality.

Property Tax

Property taxes are due if you own property or real estate and it must be paid to the local government.

Gross Receipts Tax

Gross receipts taxes are imposed by some states on businesses instead of a state income tax. In these states, gross receipts (revenues) of the business are taxed.

Some states allow deductions for gross receipts tax and some states exempt certain types of businesses. ATBS can help you determine if you are responsible for this tax and if a deduction is applicable.

Preparing and Filing Taxes

Who is currently preparing and filing the taxes for your business?

  • A non-specialized provider?

  • A family member or yourself?

  • A local accountant?

If you are using any of the options above, you may be paying more tax than you need to. Continuously changing tax laws make it hard for any business owner to understand and accurately file and pay taxes. Filing accurately and maximizing deductions to reduce the tax burden starts with choosing a specialized business provider for your industry.

Using ATBS to prepare your federal, state, and local taxes can translate to an easy and seamless tax preparation process. With ATBS, there are just three easy steps to file your taxes:

  1. Send ATBS all your business receipts

  2. Complete our tax organizer

  3. Be available for follow-up questions

ATBS will take this information and make sure you receive every tax deduction you deserve while remaining in compliance with the IRS. We give each return personalized attention, including an extensive review process by a tax professional, to make sure it’s done right.

Throughout the year, we’ll also provide you with your tax estimate amounts so you know how much to pay. Tax estimates are calculated on “actual profit” and can be accessed on a secure online portal anytime, anywhere.

At ATBS, we have helped more than 150,000 owner-operators over the past 20 years run a better business. We offer a variety of services including bookkeeping, accounting, and tax preparation, which will provide you with the best outcome when filing your tax return. We also offer unlimited business consulting for our RumbleStrip Professional clients. A dedicated business consultant will help you keep your business “between the lines” just like rumblestrips on the highway keep your truck between the lines. If you’d like to learn more about ATBS services or want to get started today, give us a call at 866-920-2827.

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