Dollars & Sense

It's almost income tax time

There is still time to plan for your 2006 taxes.  If need be, you can accelerate your expenses, put new equipment into service before January 1, 2007, and open a Keogh Self-Employed Retirement Plan. 

You can also take advantage of the “UNI” 401K.  It allows 100% of the first $15,000 ($20,000 if you are 50 or older) of income to be sheltered for 2006 and 20% of all self-employment income up to a combined $44,000.  If you are 50 or older, it is $49,000.

The UNI 401K as well as the Keogh Plan must be opened prior to January 1, 2007, but can be funded by the due date of your income tax return including extensions.  If you don’t open these plans, you can contribute to an SEP-IRA (Simplified Employee Pension) up to the time you file your tax returns including extensions. 

You can contribute to an IRA for you and your spouse up to $4,000 each per tax year until April 15, 2007.  Age 50 or older can contribute an additional $1,000 each.  Discuss with your tax preparer whether you should have a Roth or traditional IRA.

Oh, Yes!  It’s that time of year again to get your records and paperwork organized for the preparation of your 2006 income tax return.  You won’t be receiving your W-2’s and 1099’s for awhile, but 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.  When your 1099’s do come, 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. 

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. Company drivers need to gather their W-2’s and compute the number of nights they were gone on the road.  Also, you need to compile any business expenses incurred such as union dues, telephone, clothing and laundry.  Refer to number 5 if it applies.  You will need to deduct any reimbursement received.

7. Determine if you have or are going to make any contributions to an IRA, SEP, Simple IRA, Keogh and/or UNI 401K plans.

8. Indicate any estimated taxes paid with corresponding dates paid.

Some truckers 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.

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.”