You won’t be receiving W-2s and 1099s for awhile, but gathering all your income and expense information is imperative for the preparation of an accurate tax return. You need to categorize all your expenses to make sure nothing is missing. You should pay special attention to the following:
1. Total your income received from deposits made or from your settlement sheets. When your 1099s do come, you can compare the total with what appears on your 1099s. If they are different, try to find out why.
2. Gather all your business expenses and total them by category for fuel, parts, repairs, tires, insurance, telephone, tolls, supplies, loading and unloading, etc.
3. Gather all contracts on purchases and/or leases for equipment acquired during the year including loan information, if financed. You will need dates for any equipment sold along with the sales price unless the equipment was used as a trade-in on a new purchase.
4. Working from logbooks, total the nights you were away from home for your per diem deduction.
5. Compile your personal tax information as it applies, such as mortgage interest, property taxes, interest and dividend income, income from sales of stock and rental property information. Remember, if you sold stock, you will need to know when it was originally purchased and how much you paid for it.
6. Company drivers who file an itemized return also will need to refer to item 5. If you have non-reimbursed business expenses, you need to compile a breakdown by category of expenses, such as association dues, telephone, work boots, weather gear, tools and a count of days out for per diem if you qualify.
7. Indicate if you have or are going to make any contributions to an IRA, SEP and/or a Keogh retirement plan.
When totaling business expenses for the year, include all checks written, credit card charges (including interest on business expenses), cash receipts, ATM and bank charges on all business transactions. Don’t forget to include all expenses withheld from settlements. Expenses should be broken down by category and totaled for the year.
There are many computer programs available to help you compile all your income and expense information for the year.
Marriage, divorce, financial support of a parent, co-habitation, birth of a child, adoption, death of a loved one – each of these changes has an impact on your taxes. Consult your tax professional if you have experienced any of these life-changing events in the past year.
If you've had equipment repossessed or voluntarily returned equipment this year, be prepared for potentially significant tax implications. The IRS considers defaulting on an equipment loan as a taxable event. When equipment is repossessed or abandoned, the taxpayer generally reports the transaction as if it is a sale.
Of course, if you don’t have the time or the patience, your bookkeeper or tax preparer can handle it for you. When tax documents start coming in be sure to compare your records with the amounts reported to the IRS especially income on 1099s. Contact your tax preparer for guidance on how to handle any discrepancies.
Self-employed retirement plans, also known as Keoghs must be opened prior to Jan. 1, 2002, for a tax deduction in 2001.
If your income warrants, income shifting is an excellent way to maximize the payment of expenses. If your income is up, pay expenses prior to Dec. 31 to lower tax for this year; for example, prepay charitable contributions and state income taxes. If income is down, you can defer paying the expenses until January. Keep in mind marginal tax rates will be lower in 2002 than in 2001.
You have until Dec. 31 to establish a maximum $3,000 capital loss from the sale of stock. Remember, you must be aware of any gains or losses incurred throughout the year to get the full $3,000 deduction. Also, be aware if you have capital gains you may want to offset those gains by taking stock losses.
There are many adequate and acceptable do-it-yourself income tax programs available. However, for those who do their own returns, are you really doing yourself a favor? You may be accounting for all your expenses, but are you getting all the deductions to which you are entitled? Did you handle the depreciation on equipment to your best advantage? Have you utilized all new changes in the tax law? Many feel they save money by doing their own returns when in fact it may be costing them much more than they realize.
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. Contributions to this article were made by Shasta May, Director of Business Development for PBS. If you would like further information, please contact us at 800-697-5153. See 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.