We are not here to give you legal advice about your taxes. That’s for lawyers and accountants, not TruckingOffice. Our perspective is about taxes and truckers. Quarterly taxes are a fact of life for independent truckers. For those coming into the trucking industry now, quarterly taxes can be a surprise.
Truckers Pay a Lot of Taxes
Everyone pays taxes, whether it’s sales tax, fuel tax, income tax, or property tax. There’s no escape. But truckers pay even more taxes.
- IFTA International Fuel Tax Agreement is an arrangement between various US and Canadian jurisdictions to calculate and pool tax payments from the trucking companies, and then disperse the payments accordingly. These quarterly taxes are due on the last days of January, April, July, and October. (If the date falls on the weekend, the due date is moved forward.) IFTA is a fuel tax. Since all governments (state/province/jurisdiction) use fuel taxes to maintain roads, they justify extra taxes on commercial vehicles, which they think do more damage to roads than cars. Miles per state or jurisdiction and fuel purchases are how the taxes are calculated and distributed.
- IRP International Registration Plan Those of us of a certain age (ok, Boomers, we remember this) trucks used to have a wall of license plates on the back of the rig. That was fun for us when we played the License Plate Game on road trips, but not so much for the truckers who had to apply for each one, remember when the tags expired, and make sure they had the right state licenses for loads. IRP apportioned plates greatly reduce the number of truck license plates needed on a rig, allowing for a twice-a-year tax to be collected. Like IFTA, the taxes collected are divided to pay each jurisdiction that the rig drove through, based on the number of miles.
- HVUT Heavy Vehicle Use Tax This is a federal tax charged to large commercial vehicles. It’s a flat rate per year that’s due by August 31.
So what’s this quarterly tax thing?
Every government entity – federal, state, local – wants our money, business or personal. The big tax date, April 15th of every year, is when our income taxes are due. However, they also have this idea that they want their payments more frequently. This leads to the idea of paying every three months against what they think will be your total tax debt every year. They divide up that estimated tax into four parts and we get to pay that way instead of waiting for one big payment in April.
We don’t have a choice in this. The IRS, state or local tax agency makes the decision and we live with it.
Who loves this system? Well, the governments do. Perhaps it guarantees an influx of monies other than in April. Perhaps it increases the chances that people will pay smaller amounts without defaulting completely on the total bill.
Quarterly Taxes Are Estimated Taxes
Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed.
Based on last year’s income (or maybe the phase of the moon), the tax agencies will decide how much we pay quarterly based on a form that we must submit. (See the IRS link for more details. Remember, we’re not accountants and we don’t offer legal or professional advice. Just snark. We have lots of snark.😁)
Make Quarterly Taxes Work For You
When April rolls around, truckers have to file IFTA, may have to file IRP, and must file business and personal tax returns. The amount of money that is paid out in April may feel like enough to put an owner-operator out of business. It’s especially frustrating if in this process, a big return comes our way. The government takes too much out during the year when we struggle to pay for fuel. The big refund makes some people happy. Not us. We would rather have the money in our pockets than in an interest-free savings account called the IRS.
Having a quarterly filing puts us in the position of controlling our cash flow. Instead of having a huge payment in April, having 3 smaller ones over the course of the year will make April less depressing. If we know exactly how much we have to pay 4 times a year, planning expenses such as regular maintenance or upgrades now is a matter of timing, not how to finance these necessary tasks.
Knowing when an expense is coming is money in our pockets. Why?
Because you can prepare.
Getting started in trucking can be expensive, so new owner-operators or independent drivers may use factoring services. They’ll sell their invoices to put money in their pocket to cover expenses. In the end, that can be a losing deal because the profit that builds the business is going into the factoring fees.
Knowing that you have a payment on a regular basis gives you time to save up. Open up a debit account and schedule deposits from your business accounts to save for the expense.
Part of knowing what loads to take is understanding how much money you need per month to pay your bills and set aside money for the future. Learning which load is bad for you, which loads are good isn’t just about making sure the price per mile is a certain amount. Old truckers know it’s not just intuition, it’s data that helps you make smart freight decisions.
That’s why TruckingOffice PRO offers a set of trucking company business reports that help truckers understand their cash flow. Knowing your costs per mile and the revenue from a load – details that standard accounting programs like QuickBooks don’t provide – can help you decide how much to save for those slow months when loads will be harder to get.
Quarterly taxes can help you beat the system and avoid the April attack on your wallet.
TruckingOffice PRO makes it easy
Owning and managing a trucking business is not just picking up loads and delivering them. You’ve learned the skills of being a trucker. Now it’s time to become a business owner. TruckingOffice PRO helps you by
- Creating a dispatch
- Mapping out a route
- Tracking mileage per load, per state, per driver
- Creating and sending invoices
- Tracking invoice payments, including late pays
- Maintenance: managing, scheduling, and tracking for DOT or FMSCA audits
- Reporting to the penny IFTA and IRP taxes
- Building LTL loads.
- Paying drivers.
This software has been designed with owner-operators and small fleets in mind. We want to help you succeed and we do it by making it easy for you.
Don’t believe it? Too good to be true? Then try it out for free! Sign up today for a free trial to discover what trucking software for a trucking business ought to be!