Owner-Operator Taxes 101: Filings and Deductions
Recently at the Great American Trucking Show, Apex attended several seminars sponsored by the Texas Trucking Association (TXTA). These seminars were designed specifically for owner-operators and provided helpful tips to increase the prospects for success of their businesses. The first session focused on income tax filing responsibilities of owner-operators and was presented by Kelly Phillips, CPA from Bell & Company, P.A. in North Little Rock, Arkansas. Please note that information below should be considered informative and should not be taken as legal or tax advice. We encourage you to consult a transportation specialist before making any tax decisions.
How should you file?
An owner-operator’s tax filing obligations depend on the type of business entity he or she has chosen to operate as. Possible entities are:
- Sole-Proprietor Schedule C Filer with Form 1040
- Single-Member LLC Schedule C Filer with Form 1040
- Partnership Filer with Form 1065
- Multi-Member LLC Filer with Form 1065
- C Corporation Filer with Form 1120
- S Corporation Filer with Form 1120-S
Most owner-operators conduct business as sole proprietors, so they file a Schedule C with Form 1040. This is an easy way to conduct business but offers no legal protection. An owner-operator seeking to limit his liability might form a single-member LLC. He would still file using Schedule C of Form 1040. A family business conducted as a partnership or as a multi-member LLC would file a Form 1065. Incorporation of a business is another alternative for owner-operators. To avoid taxation once at the corporate level and again when earnings are distributed to the shareholders, filing an election with the IRS to become an S Corporation should be considered. To protect yourself and file properly, be sure to meet with a transportation specialist to figure out the best solution for you.
Tax incentives you may miss out on:
- Per diem: Truckers may deduct up to 80% of $59 a day for per diem on days when they are on the road. For days when drivers leave and come back, only a partial deduction is available. This is a very strict standard, so if you choose to take the deduction, it’s important to notate it properly in your records for the IRS. You can do so by recording deductions in your log book. These records need to be kept for about three years, so scanning the logs in is a great way to keep the records handy to access at any time. The current per diem rate is announced in October every year, so be on the lookout for deduction changes soon.
- Self-employed health insurance: If you have health insurance and your company shows income, you can take a deduction for the insurance premiums on page one of your tax return. This is the newest deduction item and your business type determines your premium and tax treatment.
- Reefer credit: If you are a reefer hauler, you can take advantage of a tax exemption for undyed diesel fuel not used over the road. The credit is $.243 times the number of reefer gallons used. To receive the credit, you need to keep record of your gallons and file Form 4136 with your tax return.
Get in touch with Apex Capital today to see how our freight factoring and fuel programs can help your business save money, work smarter, and grow. Call 1-855-369-APEX.