Bottom Line
Tax Tips
It’s Tax Time - Prepare Now

Harry and Howard 
PBS Tax and Bookeeping Service

 

You're nervous about taxes but your records are not together. What should you do? In addition to various 1099s, W-2s, year-end mortgage statements, etc., you need to gather your business records. You can either prepare an operating report showing your income and expenses, or you can hire a bookkeeper or your tax preparer to do it for you.

What to Include

A.  Income

1.  Settlement sheets showing income and charge backs

2.  Actual amounts received if no settlement sheets

B. Expenses

1.  Check stubs

2.  Paid bills

3.  Cash receipts

4.  Charge slips or monthly credit card statements

5.  Comdata checks

Get it done soon or have someone do it for you. The amount of money people pay in penalties and interest would more than pay for a tax advisor or preparer. A tax professional could also save you thousands of dollars in taxes each year.

FAQS   

Q: Can I deduct an office in my home?

A: This is tough for most truckers to do in 1998. IRS rules say the portion of the home claimed for home office space must be used regularly and exclusively as a principal place of business or for meeting or dealing with clients and customers in the ordinary course of business.

But this rule is changing. Starting in 1999, home office deductions will be easier to obtain. This is because the definition of "principal place of business" will be expanded to include a home office used for administrative or management activities of a business for which there is no other fixed location.

So next year, truckers and others whose work takes place for the most part outside of the home will be entitled to a deduction for related home office expenses. One of the write-offs for having a home office is depreciation on the portion of a home used for business if that home is owned by the taxpayer. If a home is rented, then a portion of the rent is deductible. Since it is business related, transportation from your home to clients, customers or to other business locations is deductible. Additionally, computers used in a home office will now be 100 percent deductible as a business expense.

But keep in mind that when you claim a deduction for business use of home, the IRS looks at the return more closely.

Q: How much of my income should I set aside for taxes?

A: Keeping in mind that everyone's situation is different, a rule of thumb would be 20 to 30 percent of your net income.

Tax shelter

Remember that the best of all possible tax shelters is the retirement plan. Self-employed plans (also known as Keoghs), simplified employee pensions (known as SEPs), and IRAs all give you tax deductions by simply transferring personal or business money into savings or brokerage accounts inside those plans. However, foregoing the IRA tax deduction for a Roth IRA could be very beneficial.

The Cellular Phone Deduction Traps

In order to deduct a cell phone used for work, there are special deduction rules that apply. Since only a percentage of business use is deductible, you must keep your monthly statements, even if you use the phone exclusively for business. LL

This article has been presented by PBS Tax & Bookkeeping Service, a company that has been providing income tax and bookkeeping services to the trucking industry for more than a quarter century. If you would like further information, please contact Barry or Howard at 800-697-5153. See our website atwww.pbstax.com.

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