It’s finally spring! Time for warmer temperatures, baseball season…and taxes. Though the deadline for filing taxes is Monday, April 15, many United States residents have yet to complete theirs. If that includes you, there are some things to keep in mind so you’re not scrambling to avoid a penalty for filing late.
There is one major tax change affecting employee truck drivers. That’s those who receive a W-2 wage statement each year from their employer. This change in filing their 2018 taxes is the Tax Cuts and Jobs Act (TCJA), which was enacted in December of 2017. It was designed to cut taxes for a majority of taxpayers and eliminated miscellaneous itemized deductions for unreimbursed business expenses. Instead of listing your itemized deductions on a Schedule A form, you get a standard deduction of $12,000 (previously $6,350) for single filers and $24,000 (previously $12,700) for married couples filing jointly.
At Dynamic Transit, we have always allowed our drivers to receive the benefit of per diem every day by filing it through our own business rather than on their own. Our compensation package has enabled our drivers to make up for any lost deductions by factoring them into cents per mile (CPM).
Taxes are a complicated topic for most people. The following are some general tax tips to keep in mind when filing or preparing to do so:
Realize that your tax situation is unique.
There are a few tax rules that apply to truck drivers more so than other working professionals. Remember that any advice from someone other than a licensed tax professional should not be taken as definitive.
Know your tax home.
Per the IRS, your tax home is the location where you work, not where you live. For example, the tax home for Dynamic drivers is Granite City, Illinois.
Utilize reliable resources.
If you’re unsure how to properly figure and file your taxes, employ the services of a trained professional. For those doing their own taxes, forms and additional information are available on the IRS website.
Gather all forms and documents you think you may need – i.e. W-2, previous years’ taxes – for any appointment you have with a tax professional.
Remember that higher wages mean higher taxes.
If you receive a higher mileage check and therefore a bigger paycheck, you’re most likely going to have higher taxes.
Make sure you file by April 15.
Even if you don’t have the funds to pay the IRS for what you owe, missing the deadline can result in penalties for “Failure to File” and/or “Failure to Pay.” You can file an extension with the IRS. This will push your deadline back to October 15, 2019. However, this extension doesn’t give you additional time to pay on taxes you owe.
Create an emergency fund.
Although this isn’t always possible, saving money throughout the year for unanticipated costs, is recommended. This type of cost may include higher-than-expected taxes. Ramsey Solutions suggests building a starter emergency fund of $1,000 followed by a savings of three to six months of expenses (if you’re out of debt).
Truck drivers may be able to maximize their tax refund. This may be accomplished by taking advantage of one or more of the following tax credits:
American opportunity tax credit(AOTC) – This credit is for qualified education expenses paid for an eligible student for the first four years of higher education. It allows you to receive a credit of up to $2,500. To be eligible to claim the AOTC, the law requires a taxpayer (or a dependent) to have received Form 1098-T, Tuition Statement, from an eligible educational institution, whether domestic or foreign. Students should get a Form 1098-T Tuition Statement from their school by January 31, which helps them figure their credit.
Child tax credit – You’re eligible for this $2,000 per child credit if your child is younger than 17 at the end of the 2018 tax year (December 31). However, you must claim the child as a dependent, and he or she must live with you at least six months of the year.
Credit for Child and Dependent Care – This credit is, according to the IRS, available to people who, in order to work or to look for work, have to pay for childcare services for dependents under age 13. You can also take it if you paid for the care of a spouse or a dependent of any age who is physically or mentally incapable of self-care.