LANDLINE

MAY, 2010

STATE REQUESTS FOR TAXES DUE

ARTICLE0510LL-2

TAX QUESTIONS:

Q: I’ve received a notice to pay a tax in another state in which I don’t live although I do have someone who works for me who lives in that state. Am I going to be liable to pay taxes in other states? My company runs in most of the 48.

A: We are receiving frequent calls from truckers who have heard from various states to pay taxes such as income or personal property taxes. Some of the states are New Jersey, Iowa, Oklahoma and Michigan.

We received a call from a client who lives and conducts his business in Tennessee. He has a driver who lives in Michigan. He received a notice from Michigan that he is liable to pay a Michigan business Tax. It turns out that if your driver picks up a load in Michigan or just drives through the state, you could be liable for the tax.

The state found out about our client because he issued a 1099 to the driver. What we discovered in our research was that our client was exempt because his mileage and his revenue attributed to the state compared to his total mileage and revenue was simply not high enough to be liable for any Michigan tax.

There are truckers out there who would have paid the tax, and that probably means year after year. If you ever receive any new type of tax to file, do your research. Do not pay anything until you are sure you are liable.

Q: I turned 65 last year and I still work. Someone told me that I don’t have to file income tax returns any longer. Is that true?

A: No. No matter what your age, if you have income, you are liable to file for and pay income taxes.

Q: I have reached full retirement age and collect social security although I still work. Do I still have to pay self-employment tax?

A: As long as you have earned income, you still have to pay into social security. It does not matter what your age is or if you are an employee or owner operator.

Q: What is my tax situation? Should I trade my rig in for a new one? Am I operating profitably: Can I increase my profit per mile?

A: Most truckers do not know how to answer these questions. Before the answers can be ascertained, you will need a record keeping system that produces a profit and loss statement. This statement is necessary to start managing cash flow, controlling costs and knowing your income tax situation. It should be done monthly or quarterly.

If you wait until the end of the year to do a profit and loss statement, the results will not be very meaningful since you could not have made use of the numbers during the year. You’ll usually complain “I’ve spent all my money on my business and I have nothing left over. How can I owe so much in taxes”? “I did not make any money!” The simple answer is there was a lack of tax planning or understanding of potential taxes.

This article has been presented by PBS Tax & Bookkeeping Services, a company that has been providing income tax and bookkeweping services to the trucking industry for over a quarter century. If you would like further information, please contact us at 800-697-5153. See our website at www.pbstax.com.

Please remember 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.