By Howard Abrams, PBS Tax & Bookkeeping
Q. I found out I don’t have any depreciation left from my equipment to write off against my taxes. Do I need to look into acquiring a new truck?
A. Not necessarily. As long as you are running efficiently, you are still keeping the majority of your hard-earned dollars.
However, if you can get more mileage per gallon with a newer truck and also save on repairs and downtime, those savings may offset the increased payments of a new rig. Then, when taking into account the depreciation benefits, you could be in a much improved financial situation after taxes.
Q. I had problems paying the balance due from my income tax return. What can I do so this does not happen again?
A. You can best prepare by keeping current with your tax situation. Do periodic projections during the year to predict your profit and related taxes. Once you determine your potential tax liability for the coming year, send in quarterly estimated taxes throughout the year so you won’t owe anything at tax time.
Q. How important is it to make quarterly estimated tax payments? I hear a lot of people say they wait until the end of the year to pay the taxes.
A. It is very important to make your estimated tax payments. If you don’t, you might pay an underpayment penalty in addition to your taxes at the end of the year. It’s better business to make payments on time.
Q. If I don’t do the tax projections, how much of my income should I set aside for taxes?
A. We believe you should set aside at least 10 percent of your gross collections. But, remember, sending the money to the government via estimated tax payments can save you needless underpayment tax penalties.
Q. I am a non-filer and I owe back taxes. Can you tell me what I should do?
A. The first thing to do is to get your back taxes filed. Do you think you owe the IRS on your unfiled returns or are they sending you letters stating that you do owe them for back taxes?
It’s possible the IRS prepared your return using income information only. A big tax bill from the IRS pertaining to an unfiled tax return would indicate that. That is why you need to get the returns done. Once the unfiled returns are prepared, you may find that you do not owe any taxes.
Since the IRS is more interested in getting you to file back taxes you do not have to worry about going to jail. It is best to file the returns prior to the IRS contacting you. The fact that you are not able to pay the back taxes should not prevent you from filing those returns.
Once the return has been filed, you can discuss your payment options with the IRS. You may find the IRS surprisingly lenient. You should also try to get the penalties waived if you have a reasonable excuse. The interest, however, cannot be waived except in rare cases.
If the IRS comes after you before you have taken the steps to file the delinquent returns, it is still not too late to work out a solution. The IRS will accept a timetable for filing the back returns.
Another reason to get current with the IRS is you may need financing. It’s doubtful you can get any loans without showing the two most recent tax returns. LL
This article is written 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 PBS at 800-697-5153 or visit their website at pbstax.com.
This column is the opinion of the writer and does not necessarily reflect the opinions of Land Line Magazine or its publisher. 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.