What is The Inflation Reduction Act? The Inflation Reduction Act was signed into law on August 16, 2022. While the act is titled the Inflation Reduction Act, it is not considered by all experts to be effective in reducing inflation. There are several areas of the economy that this act seeks to make changes to including keeping health insurance affordable, helping to make prescription drugs more affordable, creating incentives for producing and using cleaner energy, and creating a minimum tax for billion-dollar corporations. To the average self-employed truck driver, this act in many ways will have little to no effect on the way you conduct your business currently. However, it does provide new opportunities for tax savings and things to watch out for over the next 10 years such as increased funding to the IRS for enforcement and collection efforts. According to Senate Democrats, the goals of the Inflation Reduction Act will be achieved by: Expanding Medicare benefits Creating energy credits for electric vehicles and residential improvements Making historic climate investment Lowering health care costs Extending the Affordable Care Act through 2025 Creating manufacturing jobs Closing tax loopholes used by billion-dollar C-Corporations Here at ATBS, we want to summarize how this new legislation could affect owner-operator truck drivers. Below you’ll find our key takeaways from the complex 730-page bill. IRS Tax Enforcement We believe the biggest provision self-employed truck drivers should be aware of is the $80 billion investment in the IRS over the next 10 years with a goal of collecting $124 billion in tax revenue. With this investment, the IRS plans on hiring 87,000 more IRS agents. Tax professionals are hopeful that taxpayers will receive better customer service from the IRS and these funds should allow the IRS to make up ground with the backlog of unprocessed tax returns. However, an increase in the number of IRS agents means an increase in the importance of filing and paying your taxes correctly and on time. This is because the IRS plans on spending more than half of the $80 billion in funding on enforcement activities such as collections, IRS legal support, criminal investigations, and technology enhancement. Over the past few years, the tax audit rate decreased from 1% of tax returns to 0.2% of tax returns. The goal with these new agents is to increase the IRS’s number of audits. According to Treasury Secretary Yellen, the IRS plans on achieving this goal by targeting those who earn $400,000 or more and are typically out of compliance. In IRS terms, out-of-compliance typically means that tax returns have not been filed at all or have been filed without following specific tax regulations. The Inflation Reduction Act has no language that prevents the IRS from increasing enforcement on taxpayers earning below $400,000. Additionally, based on the number of people who are currently making $400,000 or more, there will be one IRS agent for every 11 people in this group. This means the IRS will likely have to audit taxpayers below this income in order to achieve their goals to increase tax revenue collection and increase audit rates to historic norms. It is likely that non-compliant taxpayers and those not filing taxes at all, regardless of income level, will soon become targets of IRS enforcement. Experts anticipate that IRS computer-generated tax notices will increase significantly and be one of the first implementations for the IRS. What does this mean for you? It means it will be as important as ever to ensure you are up-to-date on filing your taxes, paying your taxes, and staying compliant year after year. It appears there will be increased pressure on those who don’t file or pay their taxes due to a higher probability of IRS enforcement. Are you a self-employed truck driver that needs help with your taxes? Click here! Climate-Related Tax Credits The Inflation Reduction Act provides roughly $369 billion in incentives for energy and climate-related programs. Many of the incentives will be seen in the form of tax credits. A few of the new tax credits we believe could affect owner-operator truckers are: Tax Credit for NEW Electric Vehicles 30% of the cost of the electric vehicle (up to $7,500) Can’t have Adjusted Gross Income over $300,000 Married Filing Jointly ($150,000 Single) The cost of the vehicle must be less than $80,000 for Van, SUV, or Truck ($55,000 for any other vehicle) Tax Credit for USED Electric Vehicles 30% of the cost of the electric vehicle (up to $4,000) Must be purchased from a dealership Can’t have Adjusted Gross Income over $150,000 Married Filing Jointly ($75,000 Single) The cost of the vehicle must be less than $25,000 The model year must be 2 years earlier than the date of purchase Three-year waiting period to receive the credit again Tax Credit for Residential Energy 30% of the cost (Limited to $150 - $1,200 annually) Several items qualify such as solar panels, windows, doors, energy-efficient appliances, etc. Need an ID number (Product Identification Number) to claim the credit Energy Tax Credits for Electric Tractor Trailers Credits available for up to $40,000 The upfront costs for electric tractors are currently estimated at $300,000 (roughly twice the price of a Class 8 diesel vehicle) If a trucker or fleet has been on the fence about purchasing electric vehicles, this credit could push them to do so. However, does this mean you should go out and purchase an electric vehicle solely for the tax credit? Not necessarily. The difference in cost between an electric truck and an internal combustion engine can be hundreds of thousands of dollars. This means a credit of $40,000 maximum is not enough to cover the difference. Additionally, it is yet to be seen whether or not the number of charging stations will keep up with the number of electric vehicles. This could make the already difficult parking situation that truck drivers face even more difficult. If you are considering a purchase of an electric tractor be sure to get all the facts first. Considerations could include: Speaking with the original equipment manufacturer (OEM) Checking for, planning, and reserving charging stations along your route Planning for the time it takes to charge the battery for the next trip Checking with qualified mechanics in the area that can make repairs to electric vehicles. Health Insurance and Care The Inflation Reduction Act will extend some of the subsidies brought on by the Affordable Care Act. Specifically, it extends the subsidies for health insurance premiums. These subsidies had been set to expire in 2023 but the Inflation Reduction Act will extend these subsidies through the end of 2025. It can be difficult sometimes for owner-operators to find affordable health insurance as employer coverage, as an employee, often provide cheaper health insurance options. With this extension, those who are self-employed have a shot at affordable care for a longer period of time. Owner-operators should search the Federal Marketplace to see if they qualify for a subsidy. Be careful when applying for a subsidy to make sure your income levels qualify. If a subsidy is granted and it turns out the income level is over the qualified amount, then a portion or even the entire subsidy is payable back to the IRS as a penalty. Additionally, a goal of the Inflation Reduction Act is to lower some health care costs overall. Out-of-pocket drugs will be capped at $4,000 by 2024 and $2,000 by 2025. Specifically, insulin will be capped at $35 per month and vaccines will continue to be free. If prices of drugs increase at a faster rate than inflation, the drug companies will be required to provide rebates to those who are affected. All of this is good news for owner-operators. Key Takeaways/What Should You Do Next? 1. IRS's funding has increased and the funding is to be spent over the next 10 years. It is likely that IRS enforcement will increase as a result. Make sure you’re staying compliant so you aren’t caught by surprise. Use a professional service, ask questions, and file and pay timely. 2. Tax credits can be a large motivator for taxpayers to make a new purchase or upgrade their home, tractor, or personal vehicle. However, don’t rush into purchasing decisions without first considering the impact on your finances. Tax credits will reduce your tax liability, but keep in mind you’ll want to confirm that a product qualifies for the tax credit before you purchase it. Additionally, analyze your energy-efficient purchase and understand that you will be paying out of pocket for it. You won’t be receiving a tax credit for the full amount of the purchase. 3. Owner-operators may want to look into the Federal Marketplace health insurance options for affordable plans. Make sure that you qualify for a subsidy for health insurance premiums before accepting a new plan. If someone applies for the subsidy and it turns out they make too much, they will owe the entire subsidy back to the IRS as a penalty. If you have any questions, feel free to give us a call or send us an email and we will assist you as best we can. As more information comes out, we will continue to make updates to this article. Sources https://www.democrats.senate.gov/imo/media/doc/inflation_reduction_act_one_page_summary.pdf https://www.ttnews.com/articles/inflation-reduction-act-offers-incentives-increase-electric-truck-adoptions https://www.forbes.com/advisor/personal-finance/inflation-reduction-act/ https://www.freightwaves.com/news/congress-approves-incentive-boost-for-ev-truck-purchases https://www.overdriveonline.com/regulations/article/15295569/inflation-reduction-act-what-ownerops-need-to-know-now

There are many reasons to continue to learn as much as possible about your field. Whether you’re motivated by money or just personal growth, ATBS has developed the Course for Advanced Business Standards (CABS) to help you succeed. Here are the top 5 reasons to continue your education: 1) Value. You can become more valuable to your employers. A well-educated driver is more likely to have a stronger skill set in their field, and therefore is more likely to get better jobs. 2) Skills. As an owner-operator, you’re the face of your company. Acquiring the skills for how to run your business successfully can create more opportunities, help you develop better relationships, and therefore generate more revenue. 3) Money. Whether it’s by learning new ways to save on fuel costs, invest, or find tax deductions – there are plenty of times when having additional education about your business can generate more income for your bank account. 4) Security. When you know what to expect down the road, you can be rest assured that you’re prepared for anything. Additional education can help you plan ahead and be ready for any problems that come your way in the future. 5) Fulfillment. You can feel a tremendous sense of accomplishment after completing your education. Learning new skills and tricks of the trade can help you feel happier in your life, have a greater sense of confidence, and feel a sense of fulfillment in the future. Choosing to put your career as an owner-operator first with additional education will put you in the driver’s seat for future success!

As you start thinking about your year-end taxes make sure you pay close attention to your expenses and deductions. This will help you save money on taxes. The key for taking these deductions is to keep accurate and detailed records. Business and personal deductions, as well as exemptions and tax credits, are all significant items to consider for year-end planning. Here are a few reminders that will help minimize tax liability for your business and personal benefit. 1. Take Note of the Deduction Allowance Limit The 2016 tax year was the first year that Section 179 was affected by the PATH Act, which was passed at the end of 2015. This act raised the deduction allowance to $500,000, and made it permanent. In addition, there is a 50% bonus depreciation deduction. To take advantage of this deduction, the equipment must have been purchased and put in service before December 31, 2016. 2. Perform Truck Maintenance Before Year-End Some expenses for truck improvements and repairs are eligible for a tax deduction. Should the expense fall under or around the amount of $500 for an item, the business may claim the purchase as a deduction under a safe-harbor tax election. To add to business deductions and further reduce tax liability, perform repairs and preventative maintenance on your truck before December 31, 2016. Remember, document and save invoices/receipts for all business expenses, and send them to ATBS before your taxes are prepared. 3. Keep Track of Personal Tax Deductible Expenses Track and detail personal expenses (itemized deductions) to further reduce tax your liability. Medical and dental expenses, home mortgage interest, property taxes, charitable contributions, tax preparation fees, unreimbursed employee expenses (for company drivers), and losses of property are all itemized deductions. However, only medical and dental expenses above 10% (7.5% for individuals or households 65 years of age or older) of adjusted gross income are deductible. Should total medical and dental expenses be at or near the 10% threshold, it may be beneficial to plan final doctor visits and medical purchases before the end of the year. Unreimbursed employee expenses and tax preparation fees are also bound to a deductible threshold amount (above 2% of adjusted gross income). 4. Claim Dependent Deductions and Education Credits Finally, claim all personal tax exemptions and credits available. Dependent exemptions and education credits provide significant tax benefit. There is a $4,050 dependency exemption for qualifying children (under 19 or a full-time student under 24) given more than half of their living support. As to education credits, there are two options for parents of students: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit. The AOTC offers the maximum credit of $2,500 for students enrolled at least half-time in a degree program (limited to the first four years of higher-education). The more available Lifetime Learning Credit allows a credit up to $2,000 per household with a student enrolled in at least one education course. If future tax-liability is a concern, perhaps convert funds into a traditional IRA to a Roth IRA. Although conversion from a traditional IRA to a Roth IRA requires taxes paid for the year of conversion, the choice may dole out rewards at a later date in the form of tax-free distributions. As always, if you have any tax questions as to the qualification of an expense deduction, exemption or tax credit, please ask your business consultant or tax consultant. We are always happy to help! Author: Piper Dargent

A misconception we see in tax planning with taxpayers is self-employment (SE) taxes (social security and Medicare) and income taxes are calculated on the same line of the tax return. The thinking of the taxpayer can be: “If I have a $5,000 tax bill, I can just spend $5,000 on my truck as a business expense and pay no taxes!” That’s incorrect. A business cost is not an equal deduction in tax due. In reality, business expenses only reduce your tax liability by .15-.30 cents on the dollar (see effective tax rate below). SE (Self Employment) tax and income taxes are the two forms of taxes sole proprietorships and single member LLC’s pay on a Federal 1040 with Schedule C return, as far as business income goes. W2 employees pay these same taxes with no choice each time they get their net paycheck. Sole proprietorships and single member LLCs have the freedom to pay these same taxes quarterly, the freedom to pay quarterly comes with the responsibility “solely” on the Sole Proprietor/Single Member LLC to pro-actively pay their taxes each quarter. Understanding and budgeting this tax payment each quarter is a critical part of being a successful independent contractor. IRS considers these forms of business as “flow-thru” entities; meaning all income from the business filters down to your individual tax rates and are not be subject to “double taxation” at a corporate/business level. Calculation of SE Tax and Income Taxes Let’s compare four owner-operator scenarios for 2018 rates: Alvin: Single Sole Proprietor who made $40,000 net income after business expenses and paid $3,500 in health insurance. Simon: Married Sole Proprietor making same as Alvin and paying same in health insurance and no spousal income. Theodore : Same as Alvin but no health insurance Dave: Same as Simon but no health insurance *Assuming no state income taxes such as TX or FL (Calculated income tax is based on 2018 tax tables issued by the IRS from taxable income line. Tax Nerds: for simplification, we are leaving out other credits that would apply to all, such as QBI.) The above diagram is in chronological order just like a 1040 Tax Return to show how the calculations flow. Simon and his spouse will pay the least due to the health insurance and married filing jointly standard deduction. But all four owner-operators pay the same SE tax because it’s calculated solely off of business income, not adjustments, exemptions or any qualifying credits. Remember business expenses are not one-to-one write-offs! Theodore just got off the phone with his tax preparer in late December 2018 and the preparer estimated he should expect around $9,845.00 (see above example) in taxes to be owed. Theodore is considering ways to ‘wipe out’ his tax liability that will be due April 15th. Without reviewing with his tax preparer, he decides to go out and spend $10,000 on December 31st on a chrome kit, new seats, tires, new paint job, etc. He figures, “I might as well put the money in the truck rather than in Uncle Sam’s hands!” Theodore submits his receipts for these purchases to his tax preparer. Come early April, Theodore gets a call from the preparer and is notified of the results as shown in the chart below: The preparer explains to Theodore that the business expenses effectively reduced his tax liability 27 cents for every dollar he put into the truck remodel. So instead of Theodore paying the $9,845 in taxes for the year, he is out of pocket for a total of $14,239 ($4,239) for taxes and ($10,000) for truck remodel. For 2018 Theodore would have been better off using his income to purchase health insurance rather than spending his income on business expenses to lower his tax liability. Why, you may ask, if there is no more health penalty, however, next year in 2019? It’s still a one to one write off. He should go after one-to-one write offs that reduce his adjusted gross income such as health insurance, 50% SE tax, self-employed IRAs, student loan interest, and health savings accounts to name a few. Health insurance is not a business expense (as a Sole Proprietor/LLC) and for good reason, otherwise, it wouldn’t be as valuable of a deduction as it is now. So it is in Theodore ’s best interest to purchase health insurance for its dollar for dollar tax incentive vs. the .27 cents on the dollar remodel of the truck in this example. Tax Planning for Future Years Usually, good tax methods can help save 20-25% of your income to satisfy tax liability (depending on your situation). Paying quarterly taxes on time will ensure no penalties or interest accrues on your tax liability. Take Alvin’s scenario for example if he didn’t pay quarterly: *$2,273.75 is Alvin’s 2018 tax liability divided by four. He should pay these for 2019 (safe harbor estimates) if he estimates income will be consistent with 2018. The key is to be vigilant in planning, budgeting and paying for taxes, identify what types of expenses you can leverage as one-to-one tax deductions to lower your tax liability, and pay quarterly estimates to minimize penalties. Before you spend, talk to us.

When your truck doubles as a living and a work space, the lines between business purchases and personal expenses can become blurry. Keeping business and personal accounts separate to avoid commingling of funds is important when you have a corporation. It is one of the ways to ensure your corporation can continue to act as a divide or veil between your business assets and your personal assets. So what is “commingling”? Commingling is when business owners use business funds as their own. Some ways people commingle funds are: Depositing checks made payable to your business into your personal bank account Making withdrawals from your business checking account to pay obvious personal expenses without the proper documentation Using the same bank account for your business and personal needs Writing business checks for personal expenses Moving money back and forth between your business and personal accounts without documentation Why is it so important to keep business and personal funds in separate accounts? Asset Protection One of the primary reasons people form an LLC or S Corp is to take advantage of tax savings. However, another reason is to achieve personal asset protection. When you form an LLC or S Corp make sure you are keeping business and personal finances separate. This is because in the instance of financial hardship or legal action against your corporation, the courts may deem it appropriate to “pierce your company’s veil” and hold you personally liable for the company’s debts or lawsuits. There are several factors the courts investigate when deciding whether to pierce a company’s veil, but one of the key factors is the presence of commingled funds. Therefore, if you treat your business’s money the same as your own, you risk the exposure of your personal assets. To avoid the risk of personal liability, comply with the rules governing the maintenance of a corporation (such as keeping proper meeting minutes and holding annual meetings) and maintain a separate business account. Accounting Mixing business and personal funds can also make accounting for your company difficult - or worse - inaccurate. Accounting is more than just doing your taxes. Accounting tells you how your business is performing. Mixing business and personal purchases in the same accounts make it difficult to have a clear view of your business’ cash flow. Without a clear view of your business, you aren’t able to properly manage your funds and see areas where you can improve. When record keeping is sloppy, you can’t be sure which parts of your business are doing well and which parts have places to reduce costs. That’s why it’s so important to implement business only accounts for cash and for credit card purchases. Taxes In addition to proper accounting, keeping your tax records and receipts separate and well-documented can ensure you’re receiving every legitimate tax deduction while protecting yourself from an audit. As the old saying goes, “Keeping your books in order keeps the tax man from your door." A few helpful tips on taxes: You can’t deduct what you can’t document. If it’s unclear whether an expense is business or personal, make a concerted effort to document it right away so you don’t miss out on the deduction come tax season. Most small business owners pay more than the law requires because they don’t have a separate system for keeping track of business expenses. Using helpful software or a trusted bookkeeper such as ATBS can ensure you’re not paying the IRS more than you should. Whether you intend to do your taxes yourself or you intend to use a tax specialist, keeping your records and receipts separate will save valuable time sorting and will ensure a deduction doesn’t get accidentally missed. Audit If your business gets audited, separate accounts will help keep things in order. If there’s a question about whether or not your venture really is a business, the IRS will check to see if you have a separate business checking account. If you’ve commingled business and personal funds, there’s a greater chance of mixing up transactions which will make for a more painful tax audit. When you set up a business account make sure you understand the fine print, including the fees and balance requirements. Also, make sure you have the supporting documentation for any business deduction claimed from an expense. Make sure the documentation includes the amount, where and when it was made, and the business purpose, in case of a request from the IRS. Business Credit Banks won’t consider okaying a loan or providing credit to any person or entity that doesn’t have a credit history. This is why in the beginning; small business owners typically rely on their personal credit and assets to fund their business. However, opening a business bank account and credit card is an important step that will build your business’ credit profile which will allow you to stop relying on your personal credit profile. Using a business credit card strictly for business expenses helps to increase your business credit card limit. This will become critical when it’s time to make larger business purchases down the road because you will benefit from lower interest rates. Also, in some cases the interest paid on a business credit card is deductible as a business expense. As an owner-operator, it’s important to maintain the professionalism of your business. Keep business finances separate from your personal finances to make sure your business is profitable, running smoothly, and has an image of professionalism. Taking your finances seriously will be apparent to carriers and can increase your business. Sources: https://www.accountingweb.com/practice/clients/5-things-your-clients-can-do-right-now-to-separate-their-personal-and-business

The American Rescue Plan Act of 2021, also called the COVID-19 Stimulus Package, is a $1.9 trillion economic stimulus bill passed by Congress and signed into law by the President on March 11, 2021. The Act builds upon many of the measures in the CARES Act and the Consolidated Appropriations Act. The team at ATBS has read through the Act and has summarized some of the key pieces of information that will have the greatest impact on owner-operator truck drivers. As you know, legislation surrounding the economic recovery of the Coronavirus pandemic has changed significantly over the past year and will likely continue to do so. We will continue to update this article with more information as it changes or becomes available. If you are a current client and have questions about this legislation, please contact your ATBS Business Consultant. If you are not yet a client and are interested in learning more about how ATBS can help you file your taxes and manage your trucking business, please give our enrollment team a call at 866-920-2827. Third Round of Stimulus Payments The third round of stimulus checks will be $1,400 per adult and qualifying dependent. These payments are set to arrive in March of 2021 at the earliest. Eligible individuals must have a valid identification number, which can be a SSN, Adoption TIN. Additionally, members of the Armed Forces must have at least one taxpayer listed on the return with a qualifying identification number to qualify. To check on the status of your stimulus payment, visit https://www.irs.gov/coronavirus/get-my-payment. Individuals who are ineligible to receive the payment include: Individuals without Social Security Numbers Individuals filing as Single with AGI above $80,000 Individuals filing as Head of Household with AGI above $120,000 Married Filing Jointly Couples with AGI above $160,000 Nonresident aliens Individuals who are claimed as a dependent of another individual Individuals who were deceased prior to 1/1/2021 Estates and Trusts One of the most significant changes in this round of stimulus payments is that dependents of any age qualify for the stimulus. That includes college-age dependents and disabled adult dependents. The 2020 tax return will be used to qualify for the stimulus payment. If a 2020 tax return has not yet been filed, then the 2019 return will be used. Taxpayers that claim qualifying children or adult dependents on their tax return will receive the stimulus check for those dependent(s). If an individual files their own return and was not claimed as a dependent by anyone else, then they will receive the stimulus check. The phase-out for single taxpayers begins at AGI levels of $75,000 - $80,000. At $80,000 the stimulus is fully phased out. Married filing jointly taxpayers phase-out begins with AGI of $150,000 - $160,000. Child Tax Credit Changes The American Rescue Plan Act includes an increase to the existing Child Tax Credit. For those unfamiliar with the Child Tax Credit, it provides dollar-for-dollar tax savings for taxpayers with children under the age of 17. The credit amount is $2,000 per child for 2020. During 2021, and for 2021 only at this time, the American Rescue Plan Act increases the Child Tax Credit in two ways: For children ages 6-17, the credit increases by $1,000 for a total annual credit of $3,000 per dependent child. For children under age 6, the credit increases by $1,600 for a total annual credit of $3,600 per dependent child. Additionally, the Act provides that a portion of the credit be issued during the calendar year 2021. Ordinarily, taxpayers receive the Child Tax Credit benefit by filing their annual income tax returns. The Act states that the IRS would start providing periodic payments of the credit potentially as frequently as monthly during 2021. The advance credit payment could begin as early as July 2021. For children ages 6-17, labeled as “School-aged children”, the taxpayer claiming the child as a dependent on their tax return would receive $250/mo per child ($3,000 / 12 = $250/mo). For children under age 6, labeled as “Young children”, the taxpayer claiming the child as a dependent on their tax return would receive $300/mo per child ($3,600 / 12 = $300/mo). If the taxpayer qualifies for the lower $2,000 tax credit due to high income, then the advance credit payment is $167/mo ($2,000 / 12 = $166.66). For children born during 2021 the IRS is tasked with creating an online portal where taxpayers can update dependent information in order to qualify for the Child Tax Credit. If the monthly advance of the Child Tax Credit begins in July 2021, that would mean that half of the credit would be advanced during 2021 and the other half would be claimed by filing a 2021 income tax return. A notable point with this enhancement of the Child Tax Credit is that the credit will be reconciled when filing the 2021 tax return. Taxpayers that file their 2021 tax return and qualify for less Child Tax Credit than they received may be required to repay the credit on their 2021 tax return. However there are safe harbor rules that protect lower income taxpayers. Taxpayers that are not required to repay any amount include those with AGI below $80,000 for single filers and $120,000 for those married filing jointly. Additionally, there are new phase-out limitations for the enhanced amount of Child Tax Credit. Single filers earning more than $95,000 and married filing jointly filers earning more than $170,000 would be phased out of the enhanced portion of the Child Tax Credit. Taxpayers that are fully phased out of the enhanced Child Tax Credit are still eligible to claim the ordinary Child Tax Credit of $2,000 on their 2021 income tax return assuming they aren’t phased out of the ordinary Child Tax Credit. The phase-out range of the ordinary Child Tax Credit is $200,000 for single filers and $400,000 for married filing jointly filers. Finally, another benefit to some taxpayers is the removal of any limitation on the refundable portion of the Child Tax Credit. The maximum refundable credit amount under 2020 law is $1,400 per child. The American Rescue Plan Act removes the limitation for 2021 tax returns and increases the refundable amount. If the right circumstances caused a taxpayer to be unable to use the entire $2,000, $3,000, or $3,600 credit to reduce their tax liability, the taxpayer would receive the remaining amount of the unused credit in the form of a refund. Earned Income Tax Credit (EITC) The Act enhances the Earned Income Tax Credit (EITC) for tax years starting 2021. For those unfamiliar with the EITC, it provides a refundable tax credit for low-income taxpayers. The changes include: Specifically for taxpayers without a qualifying child, the minimum age to qualify for EITC is lowered from age 25 to age 19. Additionally, for taxpayers without a qualifying child, the maximum age to qualify for EITC has been removed. Previously taxpayers age 65 or older did not qualify. Married individuals that are separated but legally married, living with a qualifying child for more than one-half of the year, and did not live with their spouse for the last 6 months of the year would now qualify for the EITC. Previously taxpayers that filed married filing separately did not qualify for EITC. It is important to note that the qualification for EITC under the new rule is not simply filing as Married Filing Separately, but refers to taxpayers that may be in the process of legal separation and meet the above criteria. There are also new limits for claiming EITC if you have investment income. Investment income is income such as interest, dividends, and capital gains. If investment income exceeds certain amounts the taxpayer is disqualified from claiming EITC. The previous investment income limit to disqualify the taxpayer from receiving the credit was $3,650 (2020) and has been increased to $10,000 for 2021. Similar to the 2020 EITC rule, passed by the Consolidated Appropriations Act, taxpayers can use 2019 earned income to calculate their 2021 EITC if they would benefit from using 2019 earned income. What this means for you: More low-income taxpayers that do not have qualifying children will now qualify for EITC due to less strict age limitations. More taxpayers with investment income will now qualify for EITC. If you don’t qualify for EITC on 2020 or 2021 income tax returns, you can use your 2019 earned income to calculate the credit. Child and Dependent Care Expenses The Act enhances the credit for child and dependent care expenses by increasing the allowable expenses, increasing the credit percentage, and increasing the AGI phase-out limits for tax year 2021. Taxpayers that pay for child and dependent care in order to work qualify for this credit. Taxpayers who are married filing jointly qualify if both spouses work. Previously, the maximum allowable expenses were $3,000 for one dependent and $6,000 for more than one dependent. That has been changed to $8,000 for one dependent and $16,000 for more than one dependent. The credit calculation has several steps. In short, the amount a taxpayer pays in childcare expenses doesn’t equal what the taxpayer receives as a credit. The credit is dependent on the level of income and total expenses paid. The maximum benefit percentage was 35% and the Act has enhanced that percentage to 50%. That means a taxpayer receiving the maximum credit for one dependent under the previous rules would receive a credit of $1,050 ($3,000 expenses x 35%). Under the new rules, the same $3,000 in expenses would result in a credit of $1,500. Additionally, if a total of $8,000 or more in childcare expenses were incurred, then the new maximum credit for one dependent would be $8,000 x 50% or $4,000. Perhaps more important than the enhancement above is that previously the dependent care credit was nonrefundable and is now fully refundable. Unemployment Benefits and Extension The Act creates two changes on unemployment benefits. First, it extends the $300 weekly unemployment benefit to September 6, 2021. Additionally Federal unemployment benefits were originally set to expire on March 14, 2021, through the Consolidated Appropriations Act passed in late December 2020. Second, the Act allows an exclusion of $10,200 of unemployment benefits from taxable income per taxpayer retroactively for 2020 tax returns. The exclusion has a phase-out of AGI above $150,000. This phase-out limitation is the same for married couples filing jointly. This rule is retroactive; it only applies to 2020 tax returns, not 2021. Currently, there is no guidance from the IRS with taxpayers who have already filed a 2020 tax return. Taxpayers that have already filed for 2020 may be required to file an amended 2020 tax return to receive the tax-free status of their unemployment benefits. The IRS will be issuing more guidance for taxpayers that have already filed and had unemployment benefits that would qualify for tax-free treatment. Extended PPP Funding The Act adds an additional $7.25 billion in funding to the $284 billion in current PPP funding still available. The increase provides expansion for certain nonprofit entities and other organizations. However, the Act does not extend the PPP’s current application period, which is scheduled to close on March 31, 2021. As of March 17, 2021, the House has passed a bill that will extend the PPP deadline by 60 days, making the new proposed deadline May 31, 2021. This bipartisan bill was passed with a 415-3 vote in the House; it now moves to the Senate, and then if it passes, to the President for signing. Student Loan Debt Forgiveness The American Rescue Plan Act lays the groundwork for the cancellation of student loan debt to be considered tax-free from 2021 through 2025. The plan has no wording specifically canceling any amount of student loan debt at this time. If Congress or a student loan lender later acts to forgive student loan debt, then under current tax law the forgiveness or cancellation of that student loan debt would not result in a tax liability. Families First Coronavirus Response Act (FFCRA) The American Rescue Plan extends payroll credits for COVID-19-related paid sick leave and paid family leave. This Act extends the credit for paid leave provided through September 30, 2021, but employers are not required to provide such leave. If an employee already used up their FFCRA credit, starting April 1, 2021, they will receive an additional 10 days (80 hours) of sick leave time. The FFCRA now includes time off taken to get the COVID-19 vaccine. Subsidy to the Affordable Care Act Under prior tax law, the premium subsidies were fully phased-out for taxpayers earning modified AGI over 400% of the federal poverty line. For example, the federal poverty line for a single taxpayer is $12,880 in 2021, so the subsidy would end at $51,520 of income. The American Rescue Plan removes the phase-out for subsidies. It also imposes a maximum health insurance rate of 8.5% of a household’s total income through 2022. That maximum rate applies to families with incomes beginning at 400% of the federal poverty line, with lower rates applying to incomes below that threshold. COBRA Premium Subsidy The Act creates a premium subsidy for federal and state COBRA coverage for “assistance eligible individuals,” defined generally as including any employee or dependent who loses group health plan coverage due to an involuntary termination of employment or because of a reduction of hours. Under prior law, the individuals who were terminated from employment were required to pay the premiums themselves rather than subsidizing them. The COBRA premiums would ultimately be paid by the employer and the employer then receives a refundable tax credit for premiums paid against certain payroll taxes. Extension and Expiration of Excess Business Losses Looking back to the Tax Cuts and Jobs Act (TCJA) this Act introduced an excess business loss limitation, meaning that for certain losses only 80% of the business’s loss could be claimed on the following year’s tax return. The rule was set to be in place from 2018 through 2025. The CARES Act suspended this rule for the tax year 2020 due to the Coronavirus pandemic, allowing full losses. The most recent American Rescue Plan Act extends the excess loss limitation rule by one year, now including 2026. Perhaps more notable is that the excess business loss limitation is back in full effect for tax years 2021 through 2026. What’s Next As previously mentioned, the details of this legislation is subject to change at any time. The team at ATBS will continue to update this article and alert our clients and subscribers whenever new information becomes available. If you are an owner-operator interested in receiving the latest news and information to help you successfully run your trucking business, please click here to sign up for the ATBS newsletter.

For an owner-operator to be successful in the trucking business, they have to do a lot more than just pick up and drop off loads. They have to focus on safety, maximizing uptime, truck maintenance, cutting costs, and preparing for taxes. On top of all that, a successful owner-operator understands the importance of maintaining good relationships. Communication and relationship building skills are a big part of running a successful trucking business. I ask many owner-operators “How good is your communication with your driver manager?” I also ask, “How good is your relationship with your driver manager?” Building this relationship and level of communication is not easy and will not just happen overnight. Many owner-operators could improve on their communication and relationship with their driver manager. At ATBS, we review each driver’s financials with them in person or over the phone. Drivers with good attitudes commonly have good miles and good settlement checks. Likewise, many drivers that have very negative attitudes usually have low miles and a lower overall income. Many drivers who change carriers blame the dispatcher or driver manager as the reason for their switch. However, these drivers seem to encounter the same problems at their new carrier. Successful owners work through problems and develop a plan to resolve it rather than abandoning it. I interviewed a driver that left his carrier because he couldn’t get along with his driver manager, and there was an incentive to sign on with a new carrier. He said that once he got there he had the same problems and headaches as before. He admitted that he needed to develop a better relationship with the people that help to him keep moving. The grass is not always greener on the other side! Once he came back to his original carrier he had a greater appreciation for what his driver manager and load planners were trying to do for him. He now tries hard every day to make their job easier, and they have a much better working relationship. Having a good attitude doesn’t just apply to the drivers. Dispatchers, driver managers, and load planners also need to stay positive and listen to the drivers. Turnover in trucking is high because drivers feel like they can do better somewhere else. Carrier employees should work hard to develop strong working relationships with every driver. If a driver is unable to build a good relationship with their driver manager, they should meet with them to find out how to resolve their issues. It is possible that a different fleet or different driver manager may have a personality that will be better for them. This would be a much better solution than leaving that carrier. I asked a driver manager what his owner-operators could do to help improve their relationship. He said, “Early communication of any and all problems.” A lot of drivers say “I am not going to do your job for you and you should have already known there was a problem.” This may be true if a driver manager only looks after a few trucks. Keep in mind that the driver manager may have 45 to 50 trucks to focus on, while the driver has one to run. Drivers should not feel like they are working “for” a driver manager but rather working “with” them. With proactive communication many problems can be avoided. Once a good line of communication is established, the driver manager knows what to expect from each owner-operator, and therefore the owner-operator knows what to expect from the driver manager. There is not a button that a driver can hit to be successful. They need to juggle many different things to ultimately succeed. Safety, time management, minimizing operating costs, and building a strong relationship with key people inside the organization will help a driver have a long, successful career.

The Treasury Department and the IRS are beginning to warn taxpayers of possible delays during this year’s tax filing season, which begins on January 24th, 2022. We are reaching out to inform you of the causes of these possible delays, while also providing you with some tips to try to minimize these delays as much as possible. These potential delays are a result of the IRS starting the tax season with millions of tax returns and pieces of mail still needing to be processed. They are significantly further behind compared to prior years, due to being tasked with administering various stimulus payments and other programs, while also dealing with staffing shortages, during the pandemic. These delays have caused, and will continue to cause, taxpayers to be frustrated with the IRS and the time it’s taking for their returns to be processed. Americans visited the IRS website to learn the status of their tax refunds more than 630 million times in 2021 while also calling more than 240 million times to a group of fewer than 15,000 employees available to take those calls. If you plan on calling the IRS with questions or for the status of your tax return, be patient and prepared to wait. In order to try and minimize the amount of time your tax return is delayed, the IRS is urging Americans to file their 2021 tax return as soon as possible. The IRS plans on taxpayers receiving their refunds within 21 days if they file electronically, file accurately, and choose to receive their refund through direct deposit. The IRS will be sending out letters in January reporting the stimulus check and advanced child tax credit payment information to be used to accurately prepare your tax return. In 2021, the IRS had problems with millions of tax returns that included discrepancies and errors. That included 11 million math errors that had to be manually reviewed. This year, the IRS is warning that inaccurate reporting of stimulus checks and the advanced child tax credit may lead to math errors that will further delay the processing for tax filers. Here at ATBS, we recommend owner-operator truck drivers begin to gather their tax information now. You may not receive your 1099 until the end of January, but that doesn’t mean you have to wait to gather your other financial information, documents, and receipts. If you are looking for assistance in filing your taxes this year, we’re here to help. We’ll ensure your taxes are filed accurately and correctly to try to get your return processed as quickly as possible. The earlier you begin the process with us, the sooner we’ll be able to file your taxes. If you have any questions or are interested in having us help you file your 2021 taxes, please give us a call at (866) 920-2827, request a call from us, or email us at info@atbs.com. We will continue to provide you with updates if we receive more information from the IRS about timelines or delays.

Did you know some of the most successful owner-operators drive as a team? In fact, last year some ATBS team driving clients made over $100,000 in net profit. ATBS helps more than 400 team driving clients navigate the tax implications team drivers face. Here are the top 6 considerations if you are thinking about team driving with your spouse or partner: 1. Qualified Joint Venture or Partnership If you are married, you don’t have to form a Partnership. A Qualified Joint Venture is for married couples that both participate in their business venture. Forming a Qualified Joint Venture saves the cost of having to file a Partnership tax return. There is less paperwork involved with a Qualified Joint Venture. You simply file a joint 1040 tax return with each taxpayer having their own Schedule C allowing them to both pay into Social Security. The best thing about team driving as husband and wife can also be the worst. Sometimes there's a little too much "closeness". It can be a challenge to find your own space, both physical and mental. - Robyn Taylor, Owner-Operator 2. Married Couple LLCs If a married couple lives in a community property state, an LLC may be treated as a Qualified Joint Venture, however, if a married couple lives in a non-community property state, an LLC is treated as a partnership for Federal tax purposes. The partnership is then required to file Form 1065. Click here for a list of community property states. 3. Split of Schedule C Income for Qualified Joint Ventures When filing a Schedule C, married Qualified Joint Ventures can split their income evenly so both people pay their portion of Social Security. If Form 1099 is filled out in one spouse’s driver’s Social Security number, your tax professional will “nominee” half of the income to the other spouse’s Social Security number so they also have income paid into Social Security. In some cases, one spouse may need to pay more or less into Social Security so it may be beneficial to split your income with a higher or lower percentage. ATBS tax professionals can further explain these Social Security benefits. 4. Non-Married Team Drivers If you are a non-married team, you are automatically a Partnership, therefore no 1099 is needed. To avoid partnership treatment, one owner-operator would need to own the business and issue the other team owner-operator a W-2. In this case, we would recommend you contact the ATBS Premium Department for assistance with Payroll Services. Aside from these legal and tax implications, it’s important to take the personal aspects into consideration as well: 5. Pros of Team Driving: May decrease tax liability as you can both take per diem and write-offs increase You and your spouse can spend more time together. You’ll be able to run more miles and make more money. You can save on utilities and other home expenses when no one is home. Driving with a teammate helps prevent physical and mental stress that single drivers may endure, such as depression, sleep apnea, diabetes, and obesity. 6. Cons of Team Driving: Time spent together may end up being one person sleeping with one person driving. The passenger may turn into a “backseat” driver, increasing conflict and tension in stressful situations. Spending too much time together may end up putting strain on the relationship. You will have very little alone time. At ATBS, over 400 of our clients are married team drivers. If you’re considering this option, please give us a call at 866-920-2827 and let us help set your business up for success and ensure your taxes are filed properly.

Almost every owner-operator began their career as a company driver and learn early to get a cash advance against their future paycheck. That’s not always a good idea for company drivers because cash in the pocket is not the same thing as money in a bank account, or money going home. When a company driver gets a cash advance, the amount of that advance flows through to their weekly paycheck where all deductions are taken from the gross earnings. A couple of typical deductions are for the advance and also for income taxes. Gross income minus all deductions is the take-home pay. The next time you’re at the truck stop or discount store, make a mental note of all the things that are set up to tempt impulse buying. The marketing teams for these places are really good at their job – with big ticket items on the way in and little ticket items on the way out. A driver can be pinched by a little paycheck when a cash advance can end-up in someone else’s pocket. Like a company driver, advances are deducted from the owner-operator’s settlement but unlike the company driver taxes are not deducted from the settlement. Self-employed Owner-operators are responsible for managing their own taxes. That’s where the trouble with cash advances and quarterly taxes can begin because any difference between the total cash advance and the total of all business receipts is called ‘income’ by the IRS. And if there is income you know what the IRS wants – they call it income tax and they want part of your income. It looks like this: Let’s say that a $400 cash advance was taken but you only have $200 in business receipts. The remaining $200 is called income and the IRS requires that it be paid at 20 - 25% of that income or $40 - $50. You have to repay the full $400 advance right away anyway, but now there is a hidden debt to the IRS. If that is done 40 times in a year that’s an invisible debt to the IRS of up to $2,000. Income taxes are due April 15th, which can make this story even worse. $400.00 Cash Advance - $200.00 Business Receipts = $200.00 Income* *subject to 20% income tax or $40.00 April 15th is the worst possible time of the year for a trucker to come up with cash. In the winter months prior to April 15th, operating costs increase and revenue decreases. Spendable income is less and it can be hard to make ends meet in January, February, and March. April comes along with a glimmer of daylight, but by April 15th, the invisible debt to the IRS is no longer invisible. Advances not offset by business receipts will be taxed as income. In this situation, the year-end tax bill makes it rough on owner-operator who haven’t planned ahead. Two things to do to get ahead of this: Take cash advances for business reasons only. Make sure to have business receipts to offset the full amount of the cash advance. If cash advances are needed for personal items, its best to make that temporary. Stop that situation and don’t get back into it. Remember meals and incidentals are not business receipts, and the daily per diem deduction is a good deal for drivers. Don’t throw away this good deal by taking advances for food. Don’t forget, the hidden tax on that advance will be due at a bad time. Pay Quarterly Tax Estimates on time. With enough time anyone can eat an elephant just one bite at a time. It’s the same with taxes. Pay quarterly taxes on time or risk trouble. April 15th is the worst time to try to find the money to pay your full tax bill. Contact ATBS for any questions about cash advances and quarterly tax estimates. Safe travels and thank you for all you do!

Many occupations require spouses to be separated for extended periods of time. I find myself in one of them. I entered trucking when I discovered I was a soon-to-be father. Working in manufacturing and living paycheck to paycheck, I knew I needed to make changes. So, I signed a 10-month contract with a mega fleet and left my crying, pregnant girlfriend (now wife), at the Greyhound station in hopes of providing a better life for us. This career was not just a sacrifice I was making, but one we made together. Maintaining a relationship as a trucker can be challenging. Looking back over our developmental arch, I can truly say we have a relationship "forged in flames" meaning, we’ve seen some stuff. Despite all the stress and pressure, we grew closer and strengthened our bond to the point where we wouldn't change a thing in our past because it led us to where we are now. To say trucking has had an impact on my relationship would be an understatement. My wife and I were able to overcome many obstacles, simply because we sought the advice of people that were older and wiser. It was a form of preventive maintenance for our relationship. I was able to find audiobooks and podcasts that were edutainment, (Educational and entertaining). From there, we learned what healthy relationships looked like, and what some common mistakes were. I've experienced firsthand and witnessed the consequences of OTR Trucking on relationships. Several men I’ve trained had problems adjusting to the new lifestyle. I’ve witnessed divorce, and have heard numerous horror stories about relationships gone sour. A question I frequently ask old-school truckers is, "Was it worth it?". The most common response I get is "No". I can't help but ask myself if I would feel the same after 30+ years. Now, for some unsolicited advice. If I could go back in time to my younger self there are three points that I'd share: communication, effort, and passion. Talking about our feelings keeps our fingers on the pulse of the relationship. This helps us feel like both parties are putting in the effort to make the relationship a success. Finally, learn how to create passion, especially for long-term relationships. After 8 years with my spouse, we still boast chemistry that I rarely see in our peers. I attribute a lot of our success to the fact that, with my job, I have the time to put the effort into studying relationships. The most significant value I take from trucking is not the money I make, but the ideas I expose myself to. In this way, trucking has been the best thing that’s ever happened to me.

We often hear the expression that we’re “products of our environment”. Unconsciously, our environment influences our behavior, mindset, and bodies. So, becoming greater than the environment presented in every career has its own obstacles. In trucking, drivers are required to sit for much of the day. This requirement has contributed to the stereotype of the "obese driver". While we should be aware of the potential negative impacts the trucking environment has, the purpose of this blog is to highlight the benefits of the trucking environment and career. For starters, most trucking is “over the road” (OTR), which means that drivers are pulled away from their friends and family. Most of our friends and family are positive influences, but sometimes they can be negative influences, even though we don’t always realize it. The great thing about trucking is that it's easy to avoid family and peer pressure when you’re 1,000 miles away. The point being that your friends and family influence your personality, but when the amount of association time is reduced with them, so is their influence. "You are the average of the top 5 people you associate with" is an expression that reinforces this idea. This leads me to my next point: mental diet is possibly the single most influential ingredient that creates our world views. What we choose to focus on influences our thoughts, and affects the way we perceive the world. This is why, much like our regular diets, our mental diets can benefit from healthy content. People tend to eat fast food out of convenience because of the abundance of options, in spite of having a vague awareness of the poor nutrition it has, in most cases (Convenience is a major contributing factor to the trucking environment). In trucking, you have the internet at your fingertips, and you can surround yourself with positive, uplifting, inspiring content, and get paid to do it. The final example I’ll provide you with is mob mentality, (think of riots), group think (tribalism), and social conditioning. The latter has basically constructed our worldview, mostly unconsciously. Trucking gives drivers the time to reflect on their own echo chambers and bubbles. Introspection is much easier when you’re not constantly engaging with coworkers or customers. I leave you with these questions: Does environment control your thinking, or does your thinking control your environment? What are some of the benefits and limitations your career choice has had on your physical body, behavior, and mindset?