In today’s business environment, it is more important than ever to keep track of your costs. You need a budget and a system for tracking income and expenses. Knowing what your expenses are is one of the first steps in determining your minimum operating costs. You need to allow for preventative maintenance, breakdowns, spikes in fuel prices and a general slowdown in business. Budget and set aside three months of your gross income for the above circumstances.
You need a recordkeeping system that will reflect accurately your income and expenses. There are various ways to keep records, and you can create your own worksheet. You can purchase an accountant’s pad at a stationery or office supply store. Record your monthly income at the top of the worksheet, and then list each month across the top of the sheet and all your expense accounts down the left side. List your fixed costs (expenses that remain the same from month to month) first and then your variable costs such as fuel, taxes, tools, supplies, etc. Using this information as a guide, try to project your costs for a year. Make a second worksheet adding your actual costs each month. When you compare the two worksheets, you can see if you are projecting accurately your future income and expenses. This can be a great help in tax planning and business management.
Calculating your cost per mile can help determine how well you are doing. To do this, divide your costs by your total number of miles driven. Then compare your budgeted costs per mile to your actual costs to see if you can rely on your projections. Being able to accurately project income and expenses is a valuable management and planning tool.
Once all of the above is in place, you should send your records to either your bookkeeper or tax preparer on a regular basis so that he or she can properly project and calculate your estimated taxes, and you can avoid unnecessary penalties and interest, which, by the way, are not deductible.
I am a company driver. What is deductible when I’m on the road?
While self-employed individuals can generally deduct any expenses incurred to earn their income, company drivers are limited to non-reimbursed expenses required by their employer. You are entitled to per diem for overnights and motel expenses. A good rule to follow for deductions would be any expenses incurred that are necessary or required in the performance of your job and/or operation of the truck, but are not reimbursed by your company, such as uniforms, gloves, logbooks, maps, cell phone, CB, tools, Windex, paper towels, showers, etc. Remember, as a company driver, these deductions are only allowed if you itemize and are not allowed if you take the standard deduction.
I hear a lot about incorporating from other drivers, but I don’t know if it’s applicable to me?
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 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.
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 1-800-697-5153. Visit our web site at www.pbstax.com. Please remember, 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.