Tax Deductions for Truck Drivers

------------------------------------------The 10-Step Process

to Maximize YourTax Deductions

The Issue

● Truck drivers pay thousands of dollars to the IRS every year that they do not owe.

● They do this by missing legitimate tax deductions.● Don’t let this happen to you!● Our 10 step process will show you how to get every

deduction you deserve.● Print these slides and keep them on hand for tax time.

Why Do You Overpay Your Taxes?

Why do you pay thousands of dollars to the IRS every year that you do not owe?

○ The tax laws are complicated.○ The tax forms are complicated.○ You incur expenses while away from your home and office.○ Many of your expenses are smaller when viewed

separately, which makes them hard to keep track of.

Nothing Has Worked

You struggle with taxes. You know you overpay. How have you tried to fix it?

○ Put receipts into different envelopes for a few months…. ○ Kept handwritten notes for a few months….○ Tried to keep an up-to-date spreadsheet….○ Try to respond to IRS’s letters….○ Mail the IRS even more money….

Don’t Throw Away Money Every Year● While times may be good now, they will not always be good.

○ There will be a time when you are between jobs. ○ There will be a time when you simply cannot drive

anymore.● It is time to take control of your finances. Taxes are your

single largest expense every year. So you are going to start there.

● Here is what you are going to do….

Here is What You Are Going to doFor your prior year tax problems:

● If you haven’t filed past tax returns, you are going to call a tax pro to get the prior year returns filed.

● If you have an unpaid tax liability, you are going to talk to a tax pro about resolving the debt.

This will save you thousands of dollars in penalties and interest.

Yes, you can call us--we can help… 1-877-IRS-ZERO (Toll Free).

Here is What You Are Going to do (Cont…)For your current year taxes, you are going to:

● Run all expenses through one bank account with an attached ATM and credit card.

● All ATM/cash transactions will be recorded in a logbook.● You will keep a mileage log.● At the end of each month, you will run all expenses through

the following 10-step process to ensure that you document deductible expenses.

The 10-Step Process

Don’t worry about taking notes. You can get a

print version of these slides here

Step 1: Ordinary & Necessary ExpenseThe first step is to determine whether the expense is ordinary and necessary for a truck driver.

● The shorthand way to answer this is to ask yourself whether a third party would agree that a truck driver would need to incur this particular expense.

● If the answer is no, the expense is not deductible.

Step 2: Unreimbursed ExpenseThe second step is to consider whether the expense was reimbursed by an employer or other party (such as an insurance company).

● Expenses that are reimbursed by a third party are not deductible. Expenses are not deductible if they could have been reimbursed by an employer or third party, but are not reimbursed merely because you did not seek reimbursement.

● Expenses that do not meet this test are not deductible.

Step 3: Not a Personal ExpenseThe third step is to determine whether the expense is a personal expense. Generally, personal expenses are those that you would incur even if you were not working as a truck driver. Personal expenses are not deductible.

Step 3: Not a Personal Expense (Cont…)Examples of personal expenses: laundry bag, containers of laundry detergent, Visine eye wash, air fresheners, bunk heater, down pillows, sets of sheets, sleeping bag, storage container, coffee pot, cooler motor, personal hygiene items, travel bag, refrigerator, sauce pan/tin foil pans, showers, thermos bottle, lunchbox ovens, toiletries, cleaning supplies, disinfectant, hand cleaner, bags of epsom salt, and identity theft insurance.

Step 3: Not a Personal Expense (Cont…)Examples of common non-personal expenses that are deductible: professional supplies (briefcase, calculator, camera, faxes, film developing, dry erase markers, and pens/pencils); misc. expenses (union or trade association dues, state or local government licenses and regulatory fees, liability insurance premiums, trade publication subscriptions, ATM fees, check re-order fees, interest on loan, Medical exams (DOT physical, drug tests, sleep apnea study), cargo straps and chains, dry cleaning for uniforms, logbooks).

Step 4: Not for ClothingThe fourth step is to consider whether the expense is for personal clothing.

● Expenses for personal clothing are not deductible. ● Clothing is not personal if it is (1) required or essential for the

job, (2) suitable for general or personal wear, and (3) is not worn outside of business.

● Expenses that do not meet this test are not deductible.

Step 4: Not for Clothing (Cont....)Examples of personal clothing: sunglasses, thermal underwear, tennis shoes, and sweatshirts. Here are some examples of business clothing: insulated coveralls, hard hat liner, rain gear, safety glasses, steel-toed boots, winter work boots, and work gloves.

Step 5: Not for a Fine or PenaltyThe fifth step is to determine whether the expense is for a fine or penalty. Fines and penalties are not tax deductible. Traffic tickets and tax penalties are examples.

Step 6: For Travel ExpensesThe sixth step is to determine whether the expense is a travel expense for traveling “away from home.” This includes meals and lodging while “away from home.”

● It can be difficult to determine whether you are “away from home.”

● A tax home is generally where your place of business is located.

Step 6: For Travel Expenses● If you are an over-the-road truck driver, you probably do not

have a tax home and most of your travel expenses are probably not deductible.

Step 6: For Travel Expenses● If you do have a tax home, you have to decide whether to use

the actual expenses or the per diem rates for meals and lodging provided by the IRS.

● These rates can be used in lieu of actual expenses, which makes it easier to document the amount of these expenses.

Step 6: For Travel Expenses ● If the per diem rates are not used (and for non-meal and

lodging travel expenses), you have to keep records showing:○ The amount of the expense.○ The departure and return date for each trip, the number of

days spent on business, and the destination/area.○ The business purpose for the expense.

Step 7: Entertainment, Amusement, etc.The seventh step is to determine whether the expense is for property used for entertainment, amusement, or recreation activities. Expenses for entertainment, amusement, or recreation activities may be deductible if they meet the directed related or associated test.

Step 7: Entertainment, Amusement, etc.● Directly related test requires that the:

○ Entertainment took place in a clear business setting, or○ Main purpose of entertainment was the active conduct of

business, and■ You did engage in business with the person during the

entertainment period, and■ You had more than a general expectation of getting

income or some other specific business benefit.

Step 7: Entertainment, Amusement, etc.● The associated test requires that the:

○ Entertainment is associated with being a truck driver, andEntertainment is directly before or after a substantial business discussion.

Step 7: Entertainment, Amusement, etc.● These expenses also cannot be deducted if they are lavish

under the circumstances. Even then, the deduction is limited to 50% of the expense.

● Also, you have to have proof to show:○ The amount of the expense.○ The date, name and address/location of place of

entertainment.○ The business purpose for the expense.

Step 7: Entertainment, Amusement, etc.● Examples of non-deductible expenses: TV/VCR, Books/Novels,

DVD movies, DVD player, Books/Magazines, and VCR tapes rented.

Step 8: Not a GiftThe eighth test is to determine if the expense was a gift. Gifts to non-employee individuals are limited to $25 per person per year.

To be able to deduct a gift, you have to have proof to show:

● The amount of the expense.● The date and description of the gift.● The business purpose.

Step 8: Not a Gift (Cont....)● Examples of gifts: gratuities paid to truck loaders/unloaders.

Step 9: Related to Your TruckThe ninth test is to determine whether the expense is related to your truck. You cannot use the standard mileage rate.

Step 9: Related to Your Truck (Cont…)● There is a special provision for truck drivers, which says that

you do not need a contemporaneous mileage log showing the amount of the expense, the time and place of travel, and the business purpose of the expense.

● This exception applies if substantially all of the use of your truck is in a trade or business of providing to unrelated persons services consisting of the transportation of persons or property for compensation or hire.

Step 9: Related to Your Truck (Cont…)● Examples of expenses related to trucks: truck depreciation (or

lease payments), fuel, oil, truck maintenance, truck repairs, tires, truck insurance, truck registration fees, truck oil changes, truck storage fees, truck licenses plates, trick washing, heavy highway use taxes, parking, and truck stop electrification.

Step 10: Related to Computer/PeripheralThe tenth step is to determine whether the expense is related to a computer and related peripheral equipment.

These expenses may be deductible if you have proof of:

● The amount of the expense.● The time and place of use of the property.● The business purpose of the use.

Tax Deductible!This is all of the steps. Expenses that survive this gauntlet of rules are generally deductible.

Recap - Identifying Deductible Expenses1. Ordinary & Necessary Expense2. Unreimbursed Expense3. Not a Personal Expense4. Not for Personal Clothing5. Not for a Fine or Penalty6. For Travel Expense While Away from Home7. For Property Used for Entertainment, Amusement, or Recreation8. Not a Gift9. Related to Your Truck

10. Related to a Computer or Peripheral

About UsWe are a full service tax firm that focuses on helping taxpayers in specific industries. This includes helping truck drivers with unpaid tax debts and other tax problems.

We provide thoughtful and experienced tax advocacy and representation for clients nationwide. You can find out more about us at www.empoweredtax.com or call us directly at (877) IRS-ZERO.

When in Doubt, GET HELP!Do you have a tax question, need help with an IRS or state audit, or with unpaid taxes?

We can help!

Call us at 877-IRS-ZERO for a FREE consultation.

Please Note: This website and the information contained on it is not tax advice. Any tax advice contained in or associated with this website is not intended or written to be used, and cannot be used, by any taxpayer for (i) the avoidance of penalties that may be imposed by any relevant tax authority, or (ii) for promoting, marketing or recommending the matters discussed herein.