In our Transportation Tuesday series, we’re partnering with industry leaders to share tips on how you can improve your business success and growth. This week’s tip is brought to you by ATBS.
A new year has begun, which means Tax Day is just around the corner. While it may seem like you have months to take care of your accounting, there are many things you can start doing now to make tax filing easier while reducing the amount you owe.
Here are four ways — and reasons why — to get started now.
1. Calculate your per diem deduction
The IRS allows you to deduct ordinary and necessary business expenses paid or incurred while traveling away from home — the per diem tax deduction. In simpler terms, this means you’re able to deduct for meals and incidental expenses for the days you are on the road and away from home for a period of time that requires sleep or rest to complete your job duties.
Effective October 1, 2021, the per diem rate increased to $69 per full day and $51.75 per partial day. For 2021 and 2022 the IRS is allowing you to deduct 100% of the rate. The per diem tax deduction is perfect for self-employed individuals or owner-operators.
If you want to take advantage of this deduction, keep track of your days on the road and be able to provide DOT ELD logs with times, dates and locations.
Get a better understanding of per diem by reading this article, Seizing the Per Diem Tax Break.
2. Catch up on quarterly tax estimates
If you have not been paying your quarterly estimated tax payments, it would be a good idea to make a larger than normal fourth-quarter tax payment to try and catch up. This will help pay any existing tax liability due when you file your 2021 tax return. It will also allow you to avoid penalties for not paying enough taxes during the year.
The fourth quarter estimated tax payment is due January 15th, 2022.
Generally, you won’t be penalized for underpayment of annual tax if you fall into one of the the following categories:
- They owe less than $1,000
- They’ve paid at least 90% of the tax due for the current year
However, it’s HIGHLY recommended you pay taxes every quarter. Failing to pay your quarterly estimated taxes can result in additional penalties that vary based on how much you owe.
Don’t let yourself get too far behind or it will become more and more difficult to get yourself caught up. It’s recommended that you set aside 25%-30% of your weekly net income for quarterly estimated tax payments.
3. Send all receipts and documents to your accountant
One of the best ways to get ready for the upcoming tax season is to send your settlement statements, receipts, and other business and tax documents to your accountant if you have one. This way, your accountant can begin getting everything in order early and let you know if they are missing any items.
If you wait until later in the tax season, it could mean that your taxes may not get done before the deadline.
4. Prepare 1099s for your contractors
The new 1099-NEC form is now used to report payments made to independent contractors for services. If you paid someone who is not your employee — such as a subcontractor, attorney or accountant — $600 or more for services provided during the year, a Form 1099-NEC needs to be completed.
A copy of the 1099-NEC must be provided to the independent contractor and the IRS by January 31 of the year following payment.
Have a tip to share or want some advice?
If you want to share your own insight and be featured in our next Transportation Tuesday Tip or if you want us to dive deeper into a challenge you’re facing, email us at tips@thebackpackcpa.com,login-dat.com,one-dat.com,load-dat.com.
About ATBS
ATBS is a preferred DAT partner that helps reduce the burden and stress of tax season by managing your bookkeeping throughout the year. With ATBS, you can:
- Improve your trucking business with professional advice
- Save time with secure bookkeeping services
- Manage your taxes without paying more than you owe
- Simplify on-the-road recordkeeping
Learn more about how you can save time with your tax and accounting needs with ATBS.
