Bary and Howard
PBX Tax & Bookkeeping Service
Tax season tips and FAQ
If the 1099 you received shows the wrong amount of income, report the incorrect 1099 information as it appears on the 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.
If you are buying a home for the first time, you can withdraw up to $10,000 from your IRA before age 59 1/2 without penalty as long as the money is applied to the purchase price.
Section 179 Business Property deduction: The expense in the year of purchase up to $20,000 for year 2000 has been increased to $24,000 for 2001.
The wage base for the Social Security portion of the self-employment tax is $80,400 in 2001 ($76,200 in 2000).
Since more people are incorporating and becoming S-corporations, be aware that S-corporation tax returns are due March 15.
I hear a lot about incorporating from other drivers, but I don't know if it is applicable for me
There has been a new Internal Revenue Service ruling for very small businesses that can reduce some paperwork. It's in the area of payroll tax deposit requirements. Simply put, the new rule states that a business that does less than $2,500 a quarter can hold onto the money until the end of each quarter. Payment can then be made with the filing of Form 941, your quarterly payroll tax return. Prior to this ruling, deposits were required to be deposited at least monthly.
Since the deposits are due less frequently, there are fewer mistakes and less penalties. However, the business owner has to be careful because your bank account will carry a larger balance during each quarter if you are depositing less frequently. You may tend to spend more money with that larger bank balance. Also, be aware that by paying quarterly, you'll have to write a fairly large check possibly up to a maximum of $2,500.
Question: I hear a lot about incorporating from other drivers, but I don't know if it's applicable for me, is it?
Answer: There are several factors to consider when trying to determine if incorporating is in your best interest. What is good for one trucker is not necessarily good for another. The most common reasons for incorporating are asset protection, limited liability and tax savings.
Here are three main considerations: Do you own a home? Do you feel your liability exposure is high? Is your income at a level high enough to realize significant tax savings? Some other things to be considered are awareness of corporate tax and payroll requirements as well as the stringent recordkeeping requirements for corporations. If you feel incorporating may be in your best interest, you should get the advice of legal and tax professionals before making your final decision.
Question: How can I justify my cash payments to my lumpers?
Answer: You need to maintain a book such as a personal organizer and enter the name, address and social security number of the person to whom you have made the payments. If that particular person earns $600 or more from you, then you have to issue a 1099 at the end of the year. If you are working for a household mover who has agencies for lumpers nationwide, then you should be able to get receipts when you pay those people.
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 Business Development for PBS. If you would like further information, please contact Barry, Howard or Shasta at 800-697-5153. Visit our web site at www.pbstax.com.