Many clients ask, "Can I still deduct the interest on my truck loan?" The truth is that any interest incurred in the production of income for your business is deductible. Not only is the interest on your truck loan deductible, but even the interest on your credit card bills are deductible providing that the charges relate to business expenses. This is a particularly important point for long-haul truckers who use their credit card while on the road in order to avoid having large amounts of cash in their pockets as they travel.
Home mortgage interest deduction is another area that needs explanation. The first rule to remember is that interest paid on a loan in conjunction with the purchase of a home is fully deductible. In addition, the points paid are also deductible. If you refinance or take a second mortgage on your home, you may deduct the interest on the loan (up to a maximum of the balance before you refinanced or took out a second mortgage, plus $100,000). These are the two basic rules. However, there are many other more complicated situations that require the expertise of a tax professional.
Finally, a word about "consumer interest" which is not deductible. The typical items of consumer interest are: Credit card interest for purchases of personal items, interest paid to the IRS on past due personal tax balances, interest on your automobile loan (if it is not used for business), and interest on any other type of loan where the proceeds are used for personal reasons.
Why use an accountant??
An accountant can act as a "buffer" between you and the IRS. As a matter of experience, the IRS tends to be much harder on taxpayers than they are on taxpayer representatives. Which brings up the question of the dreaded – and much to be avoided – IRS audit. Just like other taxpayers, truckers can claim every legitimate deduction but, at the same time, they need to be aware of deductions that will draw attention to or "red flag" their tax return. Even if it is legitimate, some deductions may not be worth taking.
I just completed my tax return and found that I owe the IRS money. What should I do? You should file the return even if you cannot pay the entire amount of taxes that you owe. By paying something, you can reduce the amount of interest and penalties that you will owe.
Can I ask to make installment payments on the amount that I owe? Yes. But before requesting and installment agreement, you should consider less costly alternatives such as a bank loan.
I am unable to pay delinquent taxes. Will the IRS accept an offer in compromise? The IRS accepts an offer in compromise to settle unpaid accounts for less than the amount owed when doubt exists that the liability can be collected in full and your offer reasonably reflects the potential collection amount. The IRS will not seriously consider an offer that does not at least equal the total amount of the equity shown on the taxpayer's financial statements.
I got audited and the IRS wants me to sign a "settlement or closing" agreement. What should I do? Before signing a settlement with the IRS, be sure you are satisfied with it. You'll be bound by it even if the IRS gives others in the same situation a better deal. If you handled the audit yourself, you might want a CPA or other tax professional to review it.