How Does A Truck Driver File Taxes
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The trucking industry is subject to many different kinds of taxes. According to Simplex Group, if you do not pay your taxes, you will be subject to fines and penalties from the Internal Revenue Service, state revenue services, and the Federal Motor Carriers Safety Administration.
There are several different types of taxes a trucking company will pay, which must be made to different entities. If you make late payments, do not pay, or pay too little, your company may be fined, your assets can be frozen, and your operations may even shut down.
What Kind of Business Entity Are You?
When you start any business in America, you will set up a business entity with your state. The type of entity you set up will determine the kind of tax forms you use.
If a person registers their business as a DBA (Doing Business As), they will pay taxes on their profits with their Social Security Number. If they start their business as a limited liability, partnership, or corporation, the state will issue them a tax identification number.
Taxes Independent Contractors and Sole Proprietorship
If you are an independent trucker, you will be able to use a 1099 form for individual jobs like any other type of independent contractor. You will also need to use a 1040 form to file taxes at the end of the year. Corporations must pay taxes quarterly, and sole proprietors pay once a year. A sole proprietorship will give a person more time to pay taxes.
If you are a sole proprietor, you should know that self-employed people must pay taxes of 15.3% on their income. The money they pay goes into the medicare and social security systems.
LLCs, Partnerships, and Corporations
Owning an LLC can be confusing at tax time. If an LLC is a single-person operation, the status will be considered irrelevant by the IRS, and the person will declare their income on a 1040 form.
Unlike sole proprietorships, LLCs have their own bank accounts. If someone has a judgment against an LLC, they can garnish the business bank account, but their personal account will be protected.
If an LLC has two members, it will be considered a partnership by the IRS. Each partner will have to file form 1065, on which they will list their share of the earnings and any deductions. In most cases, they will also have to pay self-employment taxes.
The main advantage of a partnership is that it will not be subject to estimated taxes like a sole proprietorship. Partners are equal in the eyes of the IRS. If a business takes on a new partner, the existing partners’ taxes will be reduced.
An LLC owner can choose to file taxes as a corporation and use tax form 1120 to file taxes. In order to change its entity status, the LLC will file form 8832. If you decide to change your entity status to a corporation, you will pay a lower tax rate than you would as an individual.
Fuel Taxes
Truckers are expected to pay fuel taxes on a quarterly basis under the International Fuel Tax Agreement. The IFTA is an agreement between the US and Canada regarding the collection and distribution of taxes on fuel purchases.
It used to be that a trucking company would have to get a tax permit in each state its trucks passed through. They would then have to pay fuel taxes to each individual state. This was time-consuming.
The IFTA simplifies things because it allows drivers to record their fuel purchases wherever they go and file a quarterly return with the IFTA office in their state. The IFTA office distributes the money to the individual states. It also distributes tax returns to drivers if they have overpaid.
Few trucking companies file their own tax returns. Look for a tax preparer who has been in the trucking business for years and is committed to helping small businesses thrive.
