Each Of The Following Causes A Cash Flow Problem Except Top 3 Tax Issues for Truckers

You are searching about Each Of The Following Causes A Cash Flow Problem Except, today we will share with you article about Each Of The Following Causes A Cash Flow Problem Except was compiled and edited by our team from many sources on the internet. Hope this article on the topic Each Of The Following Causes A Cash Flow Problem Except is useful to you.

Top 3 Tax Issues for Truckers

Every tax season, thousands of truck drivers leave hundreds of thousands of dollars in tax breaks on the table. This is largely caused by inadequate planning and poor bookkeeping. Additionally, many tax professionals misinform truck drivers about the various tax benefits available to them. Truck drivers have access to many different tax deductions and credits, however the three main areas that cause tax liabilities to arise include depreciation, wages and cash on accrual basis.

Amortization

In general, buying or leasing tractors and trailers requires a large upfront investment. Often start-up owner/operators find comfort in financing due to lease terms of up to five years, which really helps control overhead and cash flow. The problem is that according to the Internal Revenue Code (IRC), you only have three years for depreciation on tractors and trailers. In other words, you can only claim depreciation for three years for tractors and five years for trailers. As a result, many owner operators end up paying for the equipment long after the tax deductions for depreciation are exhausted. Another challenge is how the Internal Revenue Service (IRS) calculates depreciation. For example, if you buy a $50,000 tractor, you can write off $16,665 the first year, $22,225 the second year, $7,405 the third year, and only $3,705 the last year. This means that your total tax liability will increase significantly in the third year that you own the equipment. Often, tax professionals fail to inform owner/operators that their potential tax liability will increase dramatically in year three. This leaves many with huge tax liabilities that they didn’t plan for and can’t afford to pay.

Cash in relation to the accounting basis

Did you know that the IRS has special rules that allow trucking companies to operate on a cash basis while other companies are supposed to be accrual? The difference between the cash basis and the accrual basis is that the cash basis requires taxes to be prepared based on money received and spent during a particular tax year. The accrual basis requires that your taxes be reported based on the money you earned (whether you received it or not) and the expenses you incurred (whether you actually paid them or not). At the very least, it is advantageous for trucking companies to operate on a cash basis because most trucking companies’ receivables exceed their liabilities. Let’s look at the scenario. Generally, customers pay shipping companies thirty or more days, but if you have employees, you will most likely pay them weekly. So, in effect, you’re paying expenses faster than you’re getting paid yourself. If you are on an accrual basis, you do not take advantage of the special available rules listed above.

Diary

Most of you already know that if you work outside the home you may be entitled to deductions for meals and entertainment expenses. Generally, deductions are taken in one of two ways. One way is to keep track of all your meal and entertainment bills incurred throughout the year. Another way is to use the per diem method. Per diem rates are determined by fiscal year, starting on October 1 of each year. These rates vary by zip code ($89.00 was standard for 2015-16) The IRS allows a certain amount to be deducted per day without you having to keep track of the bills. However, it would be wise to keep your receipts anyway in case you need to prove that you were actually on the road during the period in question. Most taxpayers can only deduct 50% of these expenses, while truck drivers subject to the DOT’s hours of service rules could deduct 80%. Please note that situations vary. For example, if your company pays drivers per diems, then the driver cannot deduct the per diems either.

In this case, only the company would be entitled to a deduction. Additionally, as a result of the per diem deduction, your itemized deductions may be limited. The per diem deduction is most beneficial when used by owner operators who can deduct these expenses on Schedule C from their income.

Video about Each Of The Following Causes A Cash Flow Problem Except

You can see more content about Each Of The Following Causes A Cash Flow Problem Except on our youtube channel: Click Here

Question about Each Of The Following Causes A Cash Flow Problem Except

If you have any questions about Each Of The Following Causes A Cash Flow Problem Except, please let us know, all your questions or suggestions will help us improve in the following articles!

The article Each Of The Following Causes A Cash Flow Problem Except was compiled by me and my team from many sources. If you find the article Each Of The Following Causes A Cash Flow Problem Except helpful to you, please support the team Like or Share!

Rate Articles Each Of The Following Causes A Cash Flow Problem Except

Rate: 4-5 stars
Ratings: 5307
Views: 5538259 3

Search keywords Each Of The Following Causes A Cash Flow Problem Except

Each Of The Following Causes A Cash Flow Problem Except
way Each Of The Following Causes A Cash Flow Problem Except
tutorial Each Of The Following Causes A Cash Flow Problem Except
Each Of The Following Causes A Cash Flow Problem Except free
#Top #Tax #Issues #Truckers

Source: https://ezinearticles.com/?Top-3-Tax-Issues-for-Truckers&id=9434686