Trucker Tax Tips, Part 1: Avoid the Pain of Procrastination

Trucker Tips for a Stress-Free Tax Season: A 4-Part Tax Primer for Truckers

Nobody likes paying taxes. Truckers, independent sorts that they are, are especially prickly about the government taking their hard-earned savings. It’s not just the money, there’s a lot of anxiety and frustration that comes with filing taxes each year—especially for owner-operators.

Knowing the best practices of tax preparation and accounting for truckers can help reduce the work of doing taxes every year and the stress of doing them wrong. It can also help ensure you reap the full reward of any tax savings you have coming to you. We at Trucker Path have teamed with the tax experts at ATBS to create a 4-part blog series to help you do just that.

Make Your Estimated Tax Payments to Avoid the Pain of Procrastination

Self-employed individuals, just like all businesses, are required to make estimated tax payments quarterly to the federal government as well as the state where the business operates.

When you are a W-2 employee of a company, taxes are automatically withheld and submitted to the government for you. As a business owner, you’re required to do it yourself. If you are going to owe $1,000 or more, you’re required to pay your taxes in quarterly installments. Not doing so brings underpayment penalties and you’ll have to pay past interest on the money you owe.

Your quarterly estimated tax payments include self-employment tax: The self-employment tax rate which includes Social Security and Medicare amounts to 15.3% of adjusted gross income.

On top of that, you need to pay federal income tax determined using the IRS’s Form 1040-ES as well as state income tax determined by your particular state—each has its own form for estimating taxes.

There are two main ways to estimate your tax.

The first is dividing what you paid in taxes the prior year by four and paying that amount each quarter.

The second is adding up your profit each quarter and calculating your tax for that amount. This method is preferable, especially for independent contractors who are just starting. It ensures tax payments are accurate which helps you avoid owing the government an unexpected amount at the end of the year.

ATBS uses the second, more accurate method to prepare tax estimates for their clients each quarter.

If you’re late for a quarterly deadline, still make the payment. If you miss a quarterly payment, ATBS recommends that you make that payment up as soon as possible. It can help lower your tax liability and avoid penalties.

It’s important to save money along the way to cover estimated taxes. ATBS suggests setting aside 25-28% of your weekly net income for quarterly taxes.

Estimated tax payments are a pain to many a truck driver. They don’t have to be. If you’re struggling to make sense of yours, Trucker Path is offering a special discount for Trucker Path users on tax and accounting services from ATBS. Learn more here

Learn expert insights into the expenses truckers can use to reduce the amount of taxes they owe.