Why do so many truckers fall behind on taxes?
Ok with all the regulations and complexities of running your own rig, sometimes record-keeping takes a back seat. You intend to get it current but other things have taken a priority. And, you haven’t kept up with the taxman. I mean the taxman hasn’t been calling so it’s easy to deal with it another day. Then you get the call you have been dreading. Your contractor or agency tells you they have a notice from the IRS to garnish your 1099 or W2. Now you’re in panic mode.
We get calls from all over the United States from people who need tax resolution help. All different job types and demographics. One of the top vocations I see in need of tax resolution help is Self Employed truckers. Sometimes they owe a quarter of a million dollars or more. The amount increases rapidly in particular if they fail to file tax returns. The problem doesn’t go away it just gets bigger. That is why it is vital not to bury your head in the sand. They will find you and they will come after you. This is the IRS, it’s their job.
The process we follow is this: If there is a garnishment that is priority #1. So, we get on the phone with the IRS and negotiate to buy time. With truck drivers, it’s common to have to file back tax returns. Sometimes records aren’t available for expenses. It is often necessary to ‘impute’ expenses. That means you can determine a reasonable number based on experience and other factors. For example per diem. If you can figure out approximate days on the road you can calculate per diem.
Once you have lifted the garnishment, filed back taxes you get a snapshot of your client’s financial situation. This is going to ultimately determine how or if the IRS debt will be re-paid. What becomes a major consideration is paying taxes going forward. Estimated Quarterlies must be paid or the IRS is not going to negotiate-period. If you are not used to paying EQ you will need to get used to it. In a lot of cases, you can kick the can down the road months, and ultimately come up with a very workable arrangement.
One final note. Often truck drivers operate as individual Schedule C filers instead of setting up an LLC or corporation. This almost never makes sense. As a sole proprietor, you pay 15.3% self-employment tax on every dollar of income AND the standard tax rate on all the income!