Tax Deductions: What is and What is Not Deductible?
Every year we get questions about certain, common nondeductible items. As we enter the tax season, here is some information on what is, and what is not deductible.
Items That Are Not Tax Deductible
Dog as Security-You may not deduct expenses for your dog while you travel for business as security, unless your animal has completed a certified guard dog training program and you have the completed certification documents as proof.
Do-It-Yourself Repair and Maintenance-You cannot deduct your own time for working on your equipment. The benefit of doing your own repairs and maintenance is the money you save by not having to pay someone to do it for you.
Deadhead and Unpaid Miles-Another misconception concerns deadhead and unpaid miles. Many truckers think that income lost as a result of deadhead and unpaid miles is a deductible item. Unfortunately that is not the case. Only the cost to operate the truck during that time is deductible such as fuel, tolls, and scales.
Downtime-You cannot deduct for downtime. Even though you may be waiting for a load and can prove you''re empty and away from home, it is not an allowable deduction.
You may hear that someone has been taking these nondeductible expenses on their tax return for years without a problem but the truth is, they simply have not yet been caught. If these items appear on a tax return that gets audited they will be disallowed and the taxpayer will be charged interest and penalty on the disallowed amounts.
Most Commonly Missed Tax Deductions
Many truckers forget the small stuff either because they are not aware of the deduction or because they don''t think the deduction is big enough to matter. Generally speaking, all money spent to realize your income and to operate your truck is deductible. A good accountant specializing in the trucking industry will help guide you through the income tax process, but being aware of all your deductions is a major key in reducing your taxes. Every little bit helps and you''d be surprised how fast the little things add up. Here are a few commonly missed deductions: All listed deductions are for business related use.
Access Fees: AOL/Earthlink, Qualcomm, Satellite
Administrative Fees: Bank Account Charges, ATM Fees, Check Reorder Fees
Annual Credit Card Fees
Association Dues (OOIDA)
Computer Software/Technical Support
Cleaning Supplies: Windex, Paper Towels
Fax and Copy Charges
Interest (business loans/business use of credit card)
Office Supplies: Pens, Pencils, Paperclips, Envelopes, Folders, Rubber Bands
Tax Preparation Fees
Trucking/Business Related Subscriptions
If the 1099 you received shows the incorrect amount of income, report the incorrect 1099 information as it appears on the 1099 form. Then add or subtract the amount of the error when computing your total. Be sure to include a letter of explanation with your return.
Always double check all Social Security numbers on your tax return, including spouse and dependents. This is especially important if you are electronically filing your tax return, every name and number on the return must match exactly as stated on the person/s social security card. Any error or mismatch will cause the tax return to be rejected by the IRS computers.
Review your tax return carefully. It is important that you review your entire return for possible errors. Any error may delay the processing of your tax return. Always make a copy of the completed tax return including all schedules.
If you have your tax return prepared and feel the results are not accurate do not file the tax return. It is always advisable to get a second opinion before filing. Once a tax return is filed, the only way to correct an error is by amending the original return, which can be costly. It is usually better to make any corrections prior to filing.
Written By: PBS Tax & Bookkeeping