If you are a driver, such as a bus driver, taxicab driver, or truck driver, you may have received a Form W-2 and the "Statutory Employee" check box in Box 13 is marked. Report that income on Schedule C, Profit and Loss from Business. Statutory employees include certain agent or commission drivers.
If you are a self-employed driver, like a taxicab driver or an Uber/Lyft/Via driver report your income on Schedule C. You must account for all self-employment income you received, including what is reported on IRS Form 1099-MISC, Miscellaneous Income, and the income that is not reported by the payer on an IRS form. Also, any tips you receive are taxable income. If you are self-employed and your net earnings are $400 or more, you must pay self-employment tax on your net profit from self-employment. Use Schedule SE to calculate your self-employment tax and report the taxes on your Form 1040. In addition, you may need to make estimated payments to cover your total taxes during the year.
If you are an employee, you are no longer able to reduce your taxes by deducting unreimbursed, work-related expenses, due to tax reform. However, the new, almost-doubled standard deduction can, for many drivers, take the place of the deductions they used to itemize.
If you are a statutory employee or self-employed, certain items may be deductible on Schedule C. You should keep receipts to substantiate these expenses.
Examples of some items you may be able to deduct include:
- Vehicle expenses (for example, parking fees and tolls; standard mileage rate if not deducting actual expenses; and actual expenses such as maintenance and repairs, fuel, oil, registration fees, insurance, tires, loan interest, and depreciation if you own the vehicle). You must keep a log book to substantiate the vehicle expenses
- Log books, lumper fees, business use of cell phone
- Travel expenses, including lodging, meals (with limitations), and laundry expenses if incurred while traveling away from home
- Union and trade association dues
- State or local government licenses and regulatory fees
- Flat-rate occupational taxes and excise taxes (for example, heavy highway vehicle use tax)
- Liability insurance premiums
- Subscriptions to trade publications
- The cost and upkeep (for example, cleaning) of uniforms if they are required for work and not suitable for everyday wear (for example, the cost of safety shoes and gloves for a truck driver carrying blacktop) Note: If you wear a company uniform but are not required to wear it, you cannot deduct uniform expenses
- Leasing costs (for example, a truck driver's trailer rental fees or a taxicab driver's rental fees paid to a cab company for the use of its vehicles)
- Fees paid for dispatch service
In addition, self-employed drivers of all stripes could be eligible for the new 20% Qualified Business Income (QBI) deduction. This deduction reduces your taxable income, which reduces your income taxes.
If these drivers are your employees (instead of independent contractors), you may be responsible for paying employment taxes, such as Social Security tax, Medicare tax, and federal unemployment tax.
When determining vehicle expenses, you cannot use the standard mileage rate for vehicles used for hire such as a taxicab, bus, or over-the-road truck.
To deduct travel expenses, you must be traveling away from home, which means your duties require you to be away from the general area of your tax home longer than an ordinary workday, and you need to sleep or rest to meet the demands of your work while you are away from home. You cannot satisfy this rest requirement by merely napping in your vehicle or grabbing a quick bite to eat. Also, you do not have to be away for a whole day, or from dusk to dawn, as long as your break from work is long enough for you to get the necessary sleep or rest. Most local drivers do not have travel expenses. However, as a long-distance truck driver, you may deduct travel expenses if you can substantiate expenses. You need to keep receipts or maintain a log with such information as the amount, time, place, and business purpose of the travel expenses incurred. Maintaining a log book with cities, distance, and driving time or keeping track of the number of hours driven and the number and duration of the stops may not be enough to support a deduction for travel expenses.
You must determine the location of your tax home before you can determine whether you are traveling away from it.
- Generally, your tax home is your regular place of business. It does not matter where you live.
- Your tax home includes the entire city or general area in which your business or work is located.
- If you have more than one regular place of business, your tax home is your main place of business.
- If you do not have a regular or a main place of business because of the nature of your work, your tax home may be the place where you regularly live.
- If you do not have a regular place of business or post of duty and there is no place where you regularly live, you are considered a transient and your tax home is wherever you work.
For example, the tax home of a driver usually is where they begin and end a trip, even if they live somewhere else. A self-employed truck driver's tax home may be at the headquarters where the trucking assignments are given out, even if that is far from where they live.
Self-employed truck drivers may also deduct 80% of the special standard meal allowance rate or their actual expenses. The 2018 special standard meal allowance is $63/full day within the US, $68/full day outside the US, $47.25/partial day within the US, $51/partial day outside the US. The special standard meal allowance is applicable if you work in the transportation industry, which includes those whose work directly involves moving people or goods by bus or truck, regularly requires them to travel away from home – and, during any single trip, usually involves travel to areas eligible for different meal allowance rates. Using the special rate for transportation workers eliminates the need for you to determine the meal allowance rate for every area where you stop for sleep or rest. If you choose to use the special rate for any trip, you must use the special rate for all trips you take that year instead of using the regular standard meal allowance rates. The latest rates are published online by the IRS in Publication 1542, Per Diem Rates. This publication is only available online and is updated throughout the year as new rates are announced by the General Services Administration.
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