Dollars & Sense

It's time to talk taxes

It's almost that time of year again when we do our reckoning with Uncle Sam.  You've still got around six weeks before the magic date in April arrives, so let's get busy!

The best way to start is by gathering all income and expense records for 2004 and coming up with totals for the year.

For income you will total all earnings from your settlement statements. If you operate with your own authority you will total all income received for the year from deposits made. Be careful not to include deposits from loans, tax or insurance refunds.

It's important to take the time to total your income so that you can compare your totals with the amounts reported to the IRS on 1099's. You'd be surprised at how many times these totals don't match. You will need to contact your tax preparer for advice on how to handle discrepancies.

For expense information you will need to include all checks written, credit card charges, cash expenses and expenses reflected on your settlement statements. Expenses should then be broken down by category, such as, fuel, maintenance/repairs, tires, tolls/scales, cell phone, etc. Once you have all your expenses sorted you will need a total for each category for the year.

Listed below are items needed for income tax preparation and are required to be mailed not later than January 31.  If you have not received these items by the first week in February, you should contact your employers or financial institutions to find out where they are or to request duplicates.

Items you should have received by early February:

1. W-2's from employers
2. 1099's from all companies and/or individuals you've done work for, brokers, motor carriers, independent businesses, etc.
3. 1099's or end of year statements from banks for interest and dividend income, brokers for stock information, mutual funds, 401K and IRA distributions, and mortgage interest statements.
4. Schedule K1 if you are involved in any partnerships or s-corporations.
5. W-2P or 1099R for pension and annuity income.
6. 1099's and year end statements for unemployment compensation, social security income and state tax refund.

Please be advised that if you have employees or used independent contractors you are also required to send out your W-2's and 1099's by January 31, as well. This includes those self-employed individuals that have hired their children to do work for their businesses. You must issue W-2's to your children to get the deduction.

Other information needed for tax preparation:

1.   Contracts for the purchase and sale of equipment.
2.   Escrow statements for the purchase, sale or refinance of property.
3.   Confirmations from charities for donations in excess of $250.

In general, you must have receipts and back up information for everything that appears on your tax returns. If getting all this information collected and totaled proves to be too time consuming or just plain overwhelming, you can hire a bookkeeper or your tax preparer to handle it for you. Most tax preparers have an income tax organizer that outlines everything needed for the preparation of an income tax return.

Don't lose out on deductions because you don't have time to sort through all your receipts. Make the time. We can't stress enough the benefit of taking the time to make sure you have every single receipt accounted for. This is especially important when you're self-employed because if you lose a receipt you lose a deduction. And when you lose a deduction it's money out of your pocket.

Each business deduction you have reduces your taxable income. What a lot of people don't understand is that your savings per deduction is based on your tax bracket. If you are in the 10% tax bracket you are going to save 10% of each dollar of deduction. If you're in the 15% tax bracket you're going to save 15% and so on. When you factor in the self-employment tax the savings is even greater. So for every business receipt you lose, you could be losing a 20-28% deduction. That's $200-$280 on a $1,000 in lost receipts.  So start looking for those receipts!!!!

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.