LANDLINE MAGAZINE
FEBRUARY 2006
ARTICLE0206LL
INCOME TAX TIME II
The Hidden Tax or is it?
Many of you have heard about or have been caught by the Alternative Minimum Tax. The purpose of this tax is to insure that taxpayers who take advantage of tax shelters must still pay the taxpayer’s “fair share.” The alternative minimum tax (AMT) is a second income tax system that runs parallel to the regular individual income tax. The AMT was intended to target a small group of high-income individuals who had managed to avoid all taxes to ensure they paid a minimum amount of tax. Changes since the AMTs original enactment mean that today it reaches into the ranks of the middle class, potentially denying them the benefit of many of the deductions, credits, and lower tax rates available under the regular income tax system. The AMT also significantly increases the complexity of tax filing for taxpayers subject to the AMT and for millions of additional taxpayers who must complete AMT forms to determine if the are subject to AMT.
The most common items that can kick in the amount in addition to large capital gains are itemized deductions for state/local taxes and miscellaneous itemized deductions. The amount, while not common, is something to be aware of when projecting your taxes for planning purposes.
TAX TIME
We’re now well into the tax filing season and if you are not ready, it’s time to get moving. For those of you who don’t have a problem gathering paperwork, you should be able to follow the income tax organizer you received from your tax preparer. If you did not receive an organizer, you can call various tax preparers, including us, to get one. You can also download one from our website at pbstax.com. A tax organizer simplifies the information gathering procedure and goes a long way in preventing the omission of important deductions. It is best to get a tax organizer from a preparer who specializes in the trucking industry.
For some of you it is an extreme hardship to gather tax information. If you are one of these people, you should box all the paperwork you have and send it to your tax preparer so they can compile the proper records to prepare a return. Instead of procrastination, this will insure the tax return gets done on time and save you the cost of needless penalties, which are not tax deductible and can exceed the cost of the tax preparation.
We have prepared a review of what’s needed for the preparation of your income tax return.
1. Make sure that you have totaled all your income and compare your figures with what is reported on your earning statements, 1099’s, W-2’s, and K-1’s. Be sure you do not include any W-2 income in the total of your self-employed income.
2. Have a breakdown and total for all business expenses by category, such as fuel, phone, insurance, repairs, parts and tires. This should include checks written, cash, credit card purchases and deductions from settlements. Don’t forget ATM and bank charges.
3. Obtain all contracts on purchases and/or leases and make copies for your tax preparer.
4. Compile your 1099’s if you’re an independent contractor or owner-operator and Wage and Earning Statements (W-2s) if you’re a company driver. You will receive tax statements on mortgage interest, property taxes, interest income, dividend income, stock sales.
5. Total the number of nights away from home to get the per diem meal allowance. For 2006, the per diem allowance is $52 per day and becomes 75% deductible.
COMMON FORGOTTEN DEDUCTIONS
Many truckers forget the small stuff either because they are not aware of the deduction or because they don’t think the deduction is big enough to matter. Every little bit helps and you’d be surprised how vast the little things add up. Don’t forget to include the following:
Administrative Fees: Bank Account Charges, ATM Fees, Check Reorder Fees
Annual Credit Card Fees & Interest (Business only credit card)
Association Dues
ComData/ComCheck Fees
Computer Software/Software Support
Cleaning Supplies; Windex, Paper Towels
Fax Charges
Internet Fees: AOL/Earthlink, Qualcomm, Satellite
Office Supplies: Pens, Pencils, Paperclips, Envelopes, Folders, Rubber Bands
Postage & Delivery Fees
Security Fees
Trucking/Business Related Subscriptions
TAX TIPS
How much of my income
should I set aside for taxes?
Keeping in mind that everyone’s tax situation is different, we recommend at least 20-30% of your net income.
Incorrect 1099
If the 1099 you received shows the wrong amount of income, report the incorrect 1099 information as it appears on the form. Then add or subtract the amount of the error when computing your total. Be sure to include a letter of explanation with your return.
Benefit Calculator on
Social Security Web Site
The Social Security Administration has launched a new Internet service which offers three increasingly detailed levels of benefit estimates. The simplest, “quick calculator,” asks only for a person’s age and current-year earnings. The most sophisticated requires the user to download software onto a home computer and allows him or her to try out various retirement scenarios.
Web Site: Social Security’s new retirement benefit calculator is at
2006 Standard Mileage
Rates
Beginning
-44.5 cents per mile for business miles driven;
-18 cents per mile driven for medical or moving purposes; and
-14 cents per mile driven in service of charitable organizations, other than activities related to Hurricane Katrina relief.
This year Congress also approved special rates in connection with miles driven in service of charities providing Hurricane Katrina relief. For 2006, these Katrina-related charitable rates will be 32 cents per mile for deduction purposes and 44.5 cents per mile for reimbursement purposes.
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.”
