Owner Operators - Tax Tips
How much will I have to set aside for taxes? Do I need to buy another truck? Should I trade-in or sell my truck outright. In order to answer those and other questions, you need to have a current profit and loss statement.
It's especially important for the owner-operator to have a handle on how they are doing on an ongoing basis. What is meant by "how are you doing on an on-going basis"? It means "What is your profit at any given time during year"? Most truckers seem to rely on their checking account to tell them how they are doing. But this is not the way to run a business. You need to adhere to a bookkeeping system so that you can produce information that is necessary for planning, tax projections, budgeting, cost analysis and to realize some kind of savings by possibly cutting expenses and where your money is going. The question again is "What is really meant by how are you doing?". To answer that question you need to know how much money you have collected for a particular period in time and how much money you have paid out for that same period of time. This is known as bookkeeping. Record keeping is the process that allows you to do the bookkeeping. There are various methods that are used in keeping books. One type that has been used for quite some time is the "shoebox" method. The shoebox method is simply a collection of receipts, paperwork, cancelled checks, credit card charges all thrown into a box. At the end of the year these pieces of paper are supposed to be put in some orderly fashion by expense category. This is the start of the bookkeeping process. However, that bookkeeping will not be very meaningful since you could have made use of the numbers during the year. But it will enable you to do your taxes.
There are ways that you can do your bookkeeping and your record keeping so that you know how your business is doing during the year so proper planning can occur. Bookkeeping is a means to keeping track of your business. Keeping accurate, organized records is essential to the success of your business. A lost receipt is a lost deduction and a lost deduction means more of your money paid out in taxes. Developing good record keeping habits can save you thousands of dollars. Have some type of filing and record keeping system in your truck for recording expenses, filing receipts and other important business documents. Keep a planner or calendar book in the truck for recording expenses you cannot get receipts for such as, truck washes, laundry, unloading, etc. Record all the details of the expense, date, and amount, to whom paid and for what. For example, when paying for lumpers for loading and unloading, it's essential to log their name, social security number, and amount paid in your planner.
A record keeping system doesn't have to be complicated. It just has to accurately reflect what you spend and what you take in. Bookkeeping is nothing more than grouping and summarizing all your income and expenses so that they can reflect, in an orderly manner, how you are doing. It can tell you how much you have collected, how much you have spent by category such as fuel, insurance, repairs, parts, etc. It can tell you if you have been successful and highlights areas where your expenses should be examined. In short, it gets you to thinking about your business and what you can do to make it better, and it enables proper tax planning.
This article has been presented by PBS Tax & Bookkeeping Service, a company which has been providing income tax and bookkeeping services to the trucking industry for over a quarter century. If you would like further information, please contact us at 800-697-5153. Visit our Web Site at www.pbstax.com.
"Everyone's financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional."