Dollars & Sense
It's Income Tax Time
It's that time of year again to get your records and paperwork organized for the preparation of your 2003 income tax return. Hopefully, you have received your 1099's by now, and you need to categorize all your expenses to make sure nothing is missing.
You should pay special attention to the following:
1. Total your income received from deposits made or from your settlement sheets. You can compare the total with what appears on your 1099s. If they are different, try to find out why.
2. Separate all your business expenses by category such as fuel, parts, repairs, tires, insurance, telephone, tolls, supplies and loading & unloading expenses. Your expenses should come from checks written, cash spent, credit card statements and deductions from settlements. Since we normally use nights away to compute meal expense, you don't need to save meal receipts. Your logbook will suffice. The current per diem rate is $40 per day.
3. Have all contracts on purchases and/or leases for equipment acquired during the year including loan information if financing was used. You will need dates for any equipment sold along with the sales price unless the equipment was traded in on a new purchase contract.
4. Compute the nights your away from home on the job.
5. Compile your personal information if it applies such as mortgage interest, property taxes, interest and dividend income, income from sales from stock and rental property information. Remember, if you sold stock, you will need to know when it was originally purchased, how much you paid for it, and the date and amount of sale. If you sold a property you will need to know date acquired, cost and cost of any improvements over the years.
6. Indicate if you have made any contributions to an IRA, SEP, Simple IRA, and/or Keogh retirement plan.
7. Indicate any estimated taxes paid with corresponding dates paid.
Some drivers will compile the information, total it and input it into the computer. Others will make a schedule of all the expenses by category. Still others will total each pile and attach their adding machine tape to the receipts.
There are those who will gather everything, throw it into a box (the shoebox method) and send it to their tax preparer for them to do the bookkeeping.
If you do use a tax preparer, remember that the more you do, the less cost you incur in the preparation of your return. If you can summarize all your expenses by category and get it on paper, it will cost less than if your tax preparer has to do it.
Whether you summarize or just send it off to your tax preparer, get your tax returns done early. By doing this, it gives you a chance to correct any errors and spot any omissions, but, prior to your receiving your tax returns, it allows your tax preparer ample time to ask you for any missing information or to discuss different possibilities for deductions that arise during the preparation of a tax return.
Because of the economy and recently enacted tax cuts, an owner-operator may be entitled to a refund because estimated taxes were overpaid. By using the increased business tax breaks such as equipment expensing and bonus depreciation and from the effects of the economy, your tax bill may be reduced lower than what was originally anticipated.
A net operating loss enables you to claim a carry-back refund going back to prior years. If either case applies, the first thing to do is to reduce or possibly eliminate paying your fourth quarter estimated tax payment due January 15, 2004.
Utilizing these possibilities can aid in your cash flow so it is important to seek the refund as soon as possible.
Beginning November 1, 2003, the IRS began charging a $150 fee for an offer in compromise. If your offer is accepted, the $150 will be credited to your tax liability. If it is not accepted, the fee will not be returned. Since it takes up to a year to process an offer in compromise, the imposed fees will be used to provide more personnel to handle the caseload.
This article has been presented by PBS Tax & Bookkeeping Service, a company which has been providing income tax and bookkeeping services to the trucking industry for over a quarter century. Contributions to this article were made by Shasta May, Director Business Development for PBS. If you would like further information, please contact us at 800-697-5153. visit our Web Site at www.pbstax.com.
"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."