"Weekly Tax Tip" is a feature of the OOIDA Web site, designed to help you make decisions critical to the survival of your trucking business. Through April 15, we'll post frequently asked questions and up-to-date answers, provided by PBS Tax & Bookkeeping Service. If you need additional information, please contact Howard at 1-800-697-5153 or visit the Web site at www.pbstax.com

2011 Tax Tips

2010 INCOME TAX ORGANIZERS

You can now access our 2010 Income Tax Organizer on our website at www.pbstax.com. Also, company drivers may access our company driver section to see if you qualify to itemize your deductions and save on your income taxes.

EARLY FILING TAX PROBLEM

If you itemize your deductions using Schedule A Form 1040, claim the first time homebuyer credit or tuition and fees deduction, you must wait to file your 2010 income tax returns due to the extension of the Bush Era tax cuts. The IRS will let us know when they will begin accepting the above type tax returns. Best guess is mid to late February.

RETIREMENT SAVER S CREDIT

Individuals are allowed a non-refundable credit of up to $1000 if Single or $2000 MFJ for contributions to an IRA or Employer-Sponsored Retirement Plan (including the self employed). There are adjusted gross income limitations. Consider this benefit when deciding whether to contribute to a retirement plan or not.

MISSING FORMS W-2 AND 1099

If you have not received your forms contact your employer. If you still cannot get them you will need to use any paperwork you have to estimate your earnings to enable you to complete your income taxes. If you are estimating your earnings and withholdings for missing W-2 s, attach IRS Form 4852 to your return. If you are estimating your 1099 income, attach a footnote, explaining your situation, to your income tax return.

UPDATED INFORMATION   1099 REPEAL AMENDMENT

The expanded 1099 information reporting requirements that was attached to the Health Care Reform Law and that was set for 2012 has been repealed by the senate and appears dead. The house must also approve it and then the President will have to sign it.

REPORT ALL INCOME

The IRS uses information returns such as 1099 s to match to your income tax returns. Any discrepancies will lead to an audit. Upon receiving the audit letter, a legitimate explanation showing you are correct will clear the matter up. We urge you to report all your income.

SEPARATE BUSINESS BANK ACCOUNTS

Self-employed individuals (owner-operators, independent contractors) should maintain a separate business bank account from their personal one. Though not required, you will have better control of your money.

DEDUCTING MOTELS

Lodging is not part of your daily per diem rate of $59. In order to deduct motels you must have  paid receipts  to substantiate the deduction.

TAX RETURNS

No matter who prepares your income tax return, review it carefully to make sure what s on it is true and correct. You, the taxpayer, is responsible for what the tax return shows. Once the return is filed and the IRS or your state finds you owe more tax, they will charge you penalties and interest in addition to the additional tax.

MAKING WORK PAY TAX CREDIT

The credit is a refundable credit of up to $400 for individual taxpayers and $800 if married filing jointly. The credit for taxpayers receiving a paycheck has been handled by their employer through automated withholding changes. If you received less than the full amount, you can claim that on your 2010 tax return. Schedule M on your tax return will help determine if any more credit is due.

Independents and owner operators who do not have taxes withheld will claim their credit on their 2010 tax return.

CHILD AND DEPENDENT CARE CREDIT

The credit is available for expenses paid for the care of your children under 13. The credit is nonrefundable, meaning it can be used to reduce your taxes but you cannot get a refund from it.

EMPLOYEE BUSINESS EXPENSES

Company drivers can deduct as an itemized deduction, unreimbursed business expenses incurred in connection with driving for your employer that are reasonable and necessary. They could include per diem, communication services, tolls, work boots etc.

SELF EMPLOYED HEALTH INSURANCE DEDUCTION

Health Insurance Premiums deductible as self-employed health insurance are also deductible for self-employment tax. This is for 2010 tax returns only.

WHAT IF I CAN T FILE ON TIME?

If you are not able to file your tax return by April 18, 2011, you may choose to file an Application for Automatic Extension of Time, Form 4868, which will extend the time you have to file your return until October 17, 2011.  By filing the extension, you will eliminate a late filing penalty.  However, an extension is not an extension of time to pay taxes due.  So if you are going to owe taxes, you should send in the money along with your extension. 

If your return is completed, file it even if you are unable to pay the tax due. The IRS will bill you. You can also set up your own payment plan by filing Form 9465.

Note: Even if you set up a payment plan the IRS may still file a federal tax lien until you make a final payment.  

TAX DEADLINE TIPS

Payments can be made online by phone using debit or credit cards or through the Electronic Federal Tax Payment System (EFTPS). You can also pay by check made out to the  United States Treasury  and include Form 1040-V.

April 18th is the last day to contribute to your Traditional or Roth IRA regardless of extension.

Reminder   If your return is completed but you cannot pay, file it with Form 9465 to set up your own payment plan.

TAX LIENS

If you have a Lien against you issued by the IRS, and it is hindering your financing abilities, contact them as the IRS has made favorable changes to their lien issuing process. You may be able to get rid of it.

 REFINANCE YOUR HOME LOAN

As you are aware interest rates are the lowest they have been in 50 years. If you have good credit, you should explore refinancing your home mortgage to obtain a lower interest rate.

 CREDIT

If your credit is bad and you are having trouble paying your bills, try to consolidate your credit card debt into one package with low monthly payments. You can also check with credit unions as they may be able to help you. Check with a credit counselor to see if you have enough income to pay off your cards over five years. Also, check your options with a bankruptcy attorney. Try to settle your debt for less than what is owed. But remember, until you have paid off your debt, your credit gets worse.

CANCELLATION OF CREDIT CARD DEBT

Generally, debt forgiveness is taxable unless one of the following applies:

Title 11 Bankruptcy
Taxpayer is insolvent
Qualified Farm Indebt ness
Residential foreclosure (Acquisition Debt)

 IRS NOTICE

The IRS sends notices for a number of reasons. If you receive a notice, do not panic. The notice may request a payment, ask for additional information or notify you of any changes. The notice will be specific on what you are asked to do. If you receive a correction notice, review it and compare it to the original tax return. Respond as needed and if you agree with the notice and no payment is due no reply would be necessary.

 ESTIMATED TAXES
(NEXT PAYMENT DUE 6/15/11)

Following is an example off not paying your estimated taxes. Clients total tax was $6155 all paid by 4/14/11. Client was hit with underpayment penalties in excess of $200 because they did not pay their quarterly estimated taxes. Please pay your estimated taxes.

Due dates for the estimated tax payments are: 4/15, 6/15, 9/15, 1/16

 HIRE YOUR CHILDREN

If you are self-employed you can hire your child and if they are under age 18, they are exempt from FICA. They can earn up to $5700 without paying income tax.

 BUSINESS MILEAGE RATE INCREASE

Effective July 1, 2011, the IRS has increased the standard mileage rate for deductible business miles to $.55   cents per mile from $.51 cents per mile for operating your automobile for business.

 FINANCING EQUIPMENT

It is best to start a relationship with a bank that actively makes equipment loans. This way when you need financing you will be good to go.

 CREDIT SCORE

Periodically check your credit score (FICO) to clear any problems that should not be there. Once a year should do it. Ask your banker if it hurts your score if you check more often.

REACHING RETIREMENT GOAL

Hiring a fee only Certified Financial Planner (CFF) should be your first or next step to reach your financial goals. Avoid Financial Planners who make money on your investments.

INCORPORATION/LLC

I hear a lot about incorporating and/or forming an LLC from other drivers, but I don t know if it s applicable for me? There are several factors to consider when trying to determine if incorporating or filing an LLC is in your best interest. What is good for one trucker is not necessarily good for another. The most common reasons to change your business entity are asset protection and tax savings. Make sure what you are trying to accomplish will be accomplished.

HELP PREVENT ID THEFT

Never carry around your social security card. Just memorize your number. Avoid carrying your checkbook. A check has your address, bank account number and possibly an imprint of your signature. Prevent someone from writing out many of your blank checks. If you know you are going to write a check, have one or two with you.

PREPARE FOR A DISASTER

Paperless records can be useful at times of disaster. All bank statements and important documents should be e-mailed to you. You can scan important papers such as W-2 s and 1099 s. Your tax returns should be emailed to you. You can then set-up an electronic file and also keep a back up accessible to you. You should be able to find the file you set up through your email.

FORM 2290 EXTENSION

Form 2290 Heavy Highway Vehicle Use Tax Return due August 31, 2011 has been extended to November 30, 2011. This will give congress time to decide if the tax is to be continued and or adjusted. The tax is currently set to expire September 30, 2011.

DUE DATE PARTNERSHIP/ S-CORPORATIONS TAX RETURNS

REMINDER   Partnership tax returns (Form 1065) for 2010 are due September 15, 2011. S-Corporations (Form 1120S) for 2010 are also due September 15, 2011.

EYEGLASSES

Truck drivers can claim as a deduction the cost of safety and sunglasses to protect your eyes if you do work during the day. You cannot claim the cost of prescription glasses unless they are sunglasses.

HURRICANE IRENE TAX FILING EXTENSIONS

For victims in North Carolina, New Jersey, and New York   more will be added in coming days.
The following tax returns filings and payment deadlines have been extended to October 31, 2011

▪ Corporations and Partnerships on extension until September, 15 2011 ▪ Individuals on extension until October 17, 2011 ▪ Estimated Tax Payments due September 15, 2011

IRS COLLECTION NOTICES

Can the IRS withhold your earnings from your employer without notice? No. Can the IRS levy your bank account without notice? No. The IRS will send many notices to you. Contact them before they take your money. A problem exists for the trucker on the road for long periods who never see their IRS notices. A good idea is to have someone check your mail periodically and have your employer notify you upon receiving any levy notices.

OFFER IN COMPROMISE (OIC)

If you are contemplating an OIC stay away from companies that demand large up front fees ($3 to $5 thousand). It does not cost that much to start the process and to determine if you might be eligible. Thousands have been lost to unscrupulous companies.

SIMPLE IRA

If you are a sole proprietor and want to open a  Simple IRA  retirement plan, you must do so by October 3, 2011 for the 2011 tax year.

Employer contributions are due by the return due date including extension.

The contribution limits can be higher than the Traditional IRA limits.

2010 INDIVIDUAL TAX RETURN FILING DEADLINE

Reminder   Filing deadline for 2010 Individual Tax Returns on extension is October 17, 2011

PER DIEM

The per diem rate of $59 per day at 80% deductible did not change as of October 1, 2011. Therefore, the above rate is good through at least September 30, 2012 at which time we will check to see if it has been revised.

OBTAIN CREDIT REPORTS

You can get free access to your credit reports at www.annualcreditreport.com.That will include the three reporting agencies that make up your FICO Report. Take an average of the three to get your FICO Score.

ESTIMATED TAXES

You should do a 2011 Income Tax Projection based on YTD Operations for tax planning and estimated tax adjustments.

SOCIAL SECURITY BENEFITS

For workers who are receiving Social Security Benefits for 2012 the earnings limit for those under full retirement age is $14,640. There is a $1 deduction from benefits for each $2 earned over $14,640.

PRE RETIREMENT WITHDRAWALS
(FINANCING EQUIPMENT)

It is bad planning to take an early withdrawal from your retirement plan to finance the purchase of a truck. The taxes and penalties are huge and a truck decreases in value.

BEWARE OF CREDIT REPAIR FIRMS

Save your Money! There are no quick fixes to your credit. Your score will rise over time if you use your credit responsibly.

LARGE FIRST YEAR DEPRECIATION WRITE OFFS EXPIRING

Sec 179 first year expensing of equipment acquisitions of up to a $500,000 write off expires at the end of 2011 where it adjusts to a limit of $125,000 for 2012.

UNI (SOLO) 401K

December 31 is the last day to open a 401k Retirement Plan to benefit you for the 2011 tax year. Once opened you will have until the return due date including extensions to fund the plan.

GUARD DOGS

Even though many truckers deduct the cost of maintaining a guard dog for their rig, the fact is, to be legitimate, the dog should have papers certifying that is in fact a trained guard dog.

 NEW EQUIPMENT   TAX DEDUCTION

In order to qualify for the depreciation deduction, any equipment purchased must be put into service in the year (in this case 2011) you acquired it.

  Weekly Tax Tips Archive

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