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5 Critical Questions Owner-Operators Should Ask a CPA

Discover 5 essential questions every trucker should ask their CPA. Dive into our article for insights on tax savings and staying IRS-compliant as an owner-operator.

4 mins readJanuary 23, 2024

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Author's Bio

Todd Amen is the President and CEO of American Truck Business Services (ATBS), one of the nation’s largest tax, consulting, and bookkeeping firms for independent contractors in the transportation industry. With 25+ years of experience, Todd is at the forefront of the trucking industry having provided financial services to over 250,000 owner-operators.

Are you an owner-operator truck driver navigating the complex world of taxes? This article reveals 5 critical questions you should be asking your CPA to ensure you're not overpaying and staying compliant.

We'll cover everything from maximizing Per Diem rates to understanding deductions for on-the-road expenses, even those involving your four-legged companion. By the end, you'll gain insights to better manage your finances and potentially save thousands in tax write-offs, all while ensuring you're in the clear with the IRS.

Dive in to discover the expertise your CPA should have to effectively handle your unique tax situation as a trucker.

1. What is a CPA for truckers?

Imagine you're a truck driver with a lot of crumpled receipts for gas, food, and repairs. It's like having a wallet full of movie tickets and snack bar receipts, but you need to remember all of them for a school project at the end of the year. That's where a CPA (Certified Public Accountant) comes in handy. They're like the super-organized friend who not only keeps your receipts in order but also knows all the rules for a school project.


What does a CPA do?


They're not just about keeping receipts. They're like a guide in a complex treasure hunt where the treasure is saving money. They understand the rules (tax laws) really well. For truck drivers, a trucking-specific CPA is even more important because they know the rules for the trucking world, like which expenses you can tell the teacher (IRS) about to get more points (tax savings).


Why are CPAs important for truckers?


The trucking world is like a big school project where everyone's using different colored pens and paper for their notes. A CPA helps make sense of all these different notes and keeps your project on track. They make sure you're not paying too much for the project materials (taxes) and help you if you're behind on your project or getting too many reminders from the school (IRS) about it.

In short, a CPA is like a super-smart buddy who knows a lot about money and taxes. A trucking-specific CPA, like ATBS, will also know a lot about the trucking industry. They help you save money, keep your financial records neat, and deal with any tax issues so you can focus on driving and not worry about the paperwork.

Financial and Legal

We’ve asked expert accountants and lawyers to answer the financial and legal questions commonly asked by owner-operators.

2. What Per Diem rate am I entitled to as an over-the-road owner-operator?

As an "over-the-road owner-operator," imagine you drive your truck across the country for work. You're entitled to a "Per Diem rate," which is like daily pocket money that the IRS allows you to claim for each day you're traveling for work.

For 2024, the IRS stipulates that you can claim 80% of $69 for each travel day within the continental United States (excluding Alaska and Hawaii). This equates to $55.20 every day.

For example, if you're on the road for 300 days a year, claiming this $55.20 daily (instead of just half, which is $34.50) could save you almost $6,000 in taxes. It's like discovering extra cash!

Furthermore, if your spouse accompanies you for work-related tasks, such as handling paperwork or loading, they can claim $34.50 per day (half of $69) as their Per Diem rate.

The Per Diem rate of $69, set by the IRS for truck drivers, encompasses:

  1. Meals: This includes breakfast, lunch, dinner, and snacks you might have throughout the day, whether it's a diner breakfast, a sandwich for lunch on the road, or dinner at a truck stop.

  1. Incidental Expenses: These are smaller costs that might slip your mind. For example:
    • Tips and Gratuity: This could be the tip you leave for the waitress at the diner or for service at a motel.
    • Phone Calls: Making a call home from a payphone, although less common now with the prevalence of cell phones.

When the IRS allows you to claim up to $69 per day for M&IE, it is accounting for these types of daily expenses. This combined allowance supports both your sustenance needs and minor costs encountered during your work travels.

Todd Amen, President and CEO of ATBS

“To qualify for the Per Diem tax deduction, the IRS requires you to be away from your 'tax home' substantially longer than an ordinary workday and need rest. Local drivers face stricter rules, as they must satisfy both being away for long hours and the necessity for rest to claim this deduction. Another way to think of it is, drivers who start and end a trip at home on the same DOT hours of service work day cannot claim per diem.”

3. Can I use the standard mileage deduction method for my trucking business?

The short answer is, no.

To understand which deduction method you need to use, let’s start by understanding what we mean by the “standard mileage deduction method”.

The standard mileage deduction method is a simplified way of calculating vehicle expenses for business use. Instead of tracking all actual vehicle-related expenses (like gas, maintenance, and repairs), you use a standard rate per mile driven for business purposes. For the tax year 2024, the IRS has set the standard mileage rates as follows:

  • Business Use: 67 cents per mile driven, which is an increase of 1.5 cents from the rate in 2023.
  • Medical or Moving Purposes: 21 cents per mile driven for qualified active-duty members of the Armed Forces, marking a decrease of 1 cent from 2023.
  • Service of Charitable Organizations: 14 cents per mile driven, which remains unchanged from 2023.

However, for owner-operator truck drivers, the situation is different. The IRS classifies a tractor as a qualified non-personal-use vehicle. This classification means that owner-operators cannot use the standard mileage rate method. Instead, they must use the actual expense method. This method requires tracking all reasonable and necessary business expenses related to the vehicle and deducting them when filing taxes.

These expenses include but are not limited to: fuel, repairs, tires, insurance and depreciation.

Understanding this distinction between the “standard mileage deduction method” (which you can’t use), and the “actual expense method” (which you should use) is crucial for owner-operators to ensure accurate tax reporting and maximize their deductions.

NOTE: It's important to only claim legitimate business expenses and keep detailed records like receipts. Incorrectly claiming personal expenses as business ones can lead to penalties, audits, or even criminal charges. Here are some examples to illustrate the difference:


Legitimate Business ExpensesIncorrectly Claimed Personal Expenses
Fuel Costs: Money spent on diesel for your truck.Family Vacation Travel: Claiming the cost of a family vacation as a business travel expense.
Truck Maintenance and Repairs: Costs for regular servicing, repairs, or parts replacement.Personal Vehicle Expenses: Using the business account to cover costs for a personal car not used for the business.
Tires: Purchasing new tires for your truck.Groceries for Home: Claiming regular home food expenses as business meals.
Insurance: Commercial truck insurance premiums.Home Utilities: Fully claiming your home's electricity or water bill, unless a specific and justified portion is used for business.
Depreciation: The decrease in value of your truck over time due to wear and tear.Personal Entertainment: Movie tickets, personal gym memberships, or other leisure activities.
Licensing and Registration Fees: Costs for keeping your truck legally registered and licensed.Non-Business Related Clothing: Buying clothes that are not uniforms or specific protective gear for trucking.
Meals and Lodging: Expenses for meals and hotels when you're on the road for business trips.Personal Phone Bills: If you have a separate personal phone, claiming its expenses under business.
Office Supplies and Equipment: If you have a home office for managing your business, costs for items like a computer, printer, or stationery.Home Maintenance: Such as repairs or improvements to your personal residence not related to a home office.

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4. Can I deduct expenses for my dog who travels in the truck with me?

While the IRS does not explicitly address the deductibility of expenses for a dog traveling in a truck, it's possible to argue that your dog functions as a security system for your truck. However, this is a gray area in tax law, and specific requirements must be met to justify such deductions.

To potentially qualify for these deductions, you would need to demonstrate that your dog primarily serves a business purpose, such as providing security for the truck and its contents. The threshold for what constitutes “providing security” is very low. In practice, as long as your dog would bark if someone were to try to break into your truck, the said threshold would be met. This means that you would qualify to have your ordinary and necessary dog-related expenses deducted from your tax liability.

However, if ever you were to be questioned about your dog by the IRS, it would be advisable to keep evidence that would help you to show that your dog is an essential part of your business operations, rather than a personal pet. Here are some ways you can do that:


AspectDetails
Document the Dog’s Role and Training - Keep records of any training for security purposes.
- Document if the dog has been trained to respond to security threats or guard the truck.
- Keep a copy of the certification if the dog is certified as a security animal.
Maintain a Log of Incidents - Record incidents where the dog acted in a security capacity, such as deterring theft or vandalism.
- Include dates, times, and a brief description of each incident.
Business-Related Expenses Only - Keep detailed records of expenses directly related to the dog’s business role (food, veterinary care, security gear).
- Do not include personal expenses like toys or non-security items.
Expert Opinion or Testimonials - Obtain statements from security experts or trainers about the dog’s role and effectiveness.
- Gather testimonials from clients or colleagues who have witnessed the dog in its security role.
Photographic or Video Evidence - Collect visual evidence of the dog in action, such as guarding the truck.
- Include photos or videos showing the dog on duty.
Consistency in Treatment - Treat the dog consistently as a working animal during trips and work hours.
- Separate the dog’s personal and business roles clearly.
Professional Consultation - Consult with a tax professional or attorney to ensure the legitimacy of deductions and compliance with tax law.

EXAMPLE: An owner-operator has a German Shepherd named Max, trained in security tasks. Max accompanies the owner on trips and stays in the truck, deterring potential thefts. The owner keeps a log of incidents where Max’s presence prevented suspicious activities around the truck. All of Max’s food and veterinary expenses, as well as a specialized harness used for his security duties, are recorded for tax purposes. The owner also has a statement from Max’s trainer outlining his training and role in security.

By following these steps and keeping thorough documentation, an owner-operator can make a strong case for the dog’s role as a security asset, potentially qualifying for relevant tax deductions. For more detailed guidelines on business expense deductions, refer to IRS Publication 535.

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5. Do you help your clients year-round or only during tax season?

Effective tax management in the trucking industry is a year-round endeavor, not just a seasonal task. This approach is essential for owner-operators to minimize their tax liability and enhance their business performance.

Key aspects of this continuous process include meticulous bookkeeping for monthly business performance tracking, calculating and paying quarterly tax estimates to avoid penalties, and seeking opportunities to bolster the bottom line through strategic reviews and industry benchmarking.

Firms like ATBS offer comprehensive support throughout the year, paralleling the non-stop nature of the trucking business. Their role is to ensure clients pay the minimum necessary taxes while simultaneously maximizing net income.

This full-time, year-round assistance aligns with the ongoing demands of managing a successful trucking business, providing a holistic approach to financial and tax planning.

About ATBS

ATBS started with a real love for trucking. Picture this: the founders, just 12 years old, helping out in their family's truck business during summer. They did everything from fixing trucks to handling office work.

When they grew up, they helped 350 drivers become their own bosses as owner-operators. That's when they realized these drivers needed more help to be good at the business side of things.

So, they created ATBS, which is like a big helper for truck drivers who run their own show. ATBS is all about making the tricky stuff like taxes and money management easier for owner-operators like you. They're the biggest firm doing this just for truckers, and they really get what your world is like.

If you're steering your own trucking business and feel swamped with all the numbers and tax stuff, ATBS is like a friendly co-pilot. Give them a shout, and they'll help you keep your business rolling smoothly, just like family.

Takeaways

  1. Maximize Your Per Diem: Ensure you're claiming the full IRS-allowed Per Diem rate of $55.20 per travel day within the continental U.S. for 2024. If you're on the road for 300 days a year, this could mean almost $6,000 in tax savings.

  1. Consider Spousal Per Diem: If your spouse assists you with work-related tasks, they can claim $34.50 per day as their Per Diem rate.

  1. Understand Per Diem Components: Recognize that the $69 Per Diem rate includes costs for meals and incidental expenses like tips and phone calls.

  1. Use the Actual Expense Method: As an owner-operator, use the actual expense method for tax deductions, not the standard mileage deduction. Track all vehicle-related business expenses like fuel, repairs, and insurance.

  1. Legitimate Business Expenses: Document all legitimate business expenses, such as fuel costs, truck maintenance, and tires. Avoid mistakenly claiming personal expenses as business ones.

  1. Deduct Expenses for a Security Dog: If you travel with a dog that serves a security purpose, you can potentially deduct related expenses. Keep detailed records of the dog’s role and training for security purposes.

  1. Year-Round Tax Management: Engage in continuous bookkeeping and tax management throughout the year, not just during tax season. This includes tracking monthly business performance and paying quarterly taxes.

  1. Seek Professional CPA Advice: Consult a trucking-specific CPA who understands your industry-specific tax requirements and can guide you in maximizing deductions and staying IRS compliant.

  1. Question Your CPA Effectively: Ask your CPA about their experience with trucking-specific tax issues, and ensure they can assist with strategic tax planning and industry benchmarking.

  1. Stay Informed and Updated: Keep up with changes in tax laws and rates, like the Per Diem rate adjustments, to ensure you're making the most of your deductions and savings.

Remember, effective tax management is a crucial part of your business as an owner-operator. Staying informed and working with a knowledgeable CPA can lead to significant financial benefits.

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