Part 2: Tax Saving Tips For Owner Operators & Family-Run Trucking Businesses

The following excerpt is from "Making The IRS Work In Your Favor" presented by Mark W. Sullivan, EA at the CMC LIVE hosted by Kevin Rutherford and Let's Truck.

Taxpayers are not entitled to deduct any expenses for using their home for business purposes unless the expenses are attributable to a portion of the home, or a separate structure, used exclusively on a regular basis.  Here is what you need to know to take advantage of a great tax saving opportunity.

The Home Office Deduction

Who can claim the home office deduction?

Only self-employed individuals may claim home office deduction.

  • Sole proprietorships claim it on Form 1040 Schedule C
  • S-corporations claim it as an office expense on Form 1120S

The IRS has two tough tests to meet:

  1. Statutory Administrative / Management Activities Test
  2. Comparative Analysis Test

Administrative / Management Activities Test

Portion of home used exclusively

  • Billing customers
  • Keeping books and records
  • There is no fixed office location

Comparative Analysis Test

  • Determining principal place of business
  • Importance of activities performed at home office
  • Time spent at location

(Refer to IRC Sec 280A(a), 280A(c), 280A(c)(1)(A))

Example
Using a den to write legal briefs and tax opinions as well as for personal purposes does not meet the requirements to claim the home office deduction.
  • Fails the Comparative Analysis Test - Importance of activities performed at home office

Calculating The Home Office Deduction

Two options:

  1. Safe Harbor Method
  2. Allocable Portion of Home Method

Safe Harbor Method

  • Calculate percentage of home or structure used for business
  • $5 per square foot, up to maximum of 300 sq. ft. or $1500
  • Deduction cannot exceed business income

Allocable Portion Of Home Method

  • Calculate percentage of home or structure used for business
  • Multiply by total costs of maintaining home
  • Deduction cannot exceed business income

(Refer to IRC Sec 280A(c)(5)(A))

Questions? Email Mark W. Sullivan, EA.


About: Per Diem Plus is a proprietary mobile software application that was designed by truckers and built by tax pros. It is the only IRS-compliant mobile app that automatically tracks each qualifying day of travel in the USA & Canada and replaces ELD backups (logbooks) to substantiate away-from-home travel.

Start your 30-day FREE trial with no credit card required today!

Download Per Diem Plus for iOS HERE

Download Per Diem Plus for Android HERE

This article was written by Mark W. Sullivan, EA, Tax Counsel to Per Diem Plus, LLC and Of Counsel to Schroeder & Associates and leads the highly specialized Tax Controversy Group. His practice is concentrated in the areas of Federal tax controversies and litigation support/expert witness services in tax and other white collar cases. He also advises on tax planning and consulting for businesses and individuals. Mark has 25 years of experience in Federal Collection, Examination and Appeals representation.

Prior to starting a private practice in 1998, Mark was an Internal Revenue Officer with the New York, NY, Saint Louis, MO and Washington, D.C. offices of the Internal Revenue Service

Disclaimer

This article includes general tax information, and therefore may not be relied upon as legal authority. This means that the information cannot be used to support a legal argument in a court case. Please consult with a licensed tax professional.

Tax Saving Tips For Owner Operators & Family-Run Trucking Businesses

The following excerpt is from "Making The IRS Work In Your Favor" presented by Mark W. Sullivan, EA at the CMC LIVE  hosted by Kevin Rutherford and Let's Truck.

Trucking like any small business is often a family affair. My son started working in my accounting practice after school when he was 10 - shredding paper, stamping and stuffing envelopes. Whether you are a solo owner operator or run a trucking company, it is not uncommon to put your kids to work helping in the business.  Here is what you need to know to take advantage of a great tax saving opportunity.

Paying Your Kids To Work In The Business

First and foremost: Your children must be bona fide employees

  • Their work must be ordinary and necessary
  • Pay must be for services actually performed
  • Services appropriate for your business
  • Any real work for your business can qualify
    • Examples: answering phones, helping with your website, stuffing envelopes, or cleaning the office
    • IRS has accepted that a seven-year-old child may be an employee
  • Duties should be related only to your business

What does IRS require for you to claim a child as an employee? 

  • Keep track of the hours your child works
  • Have a written employment agreement specifying his or her job duties and hours

WARNING:

  • No business deductions for personal services, such as babysitting or mowing your lawn at home
  • Money you pay for yard work performed on business property could be deductible as a business expense

There are different rules for Sole Proprietor / Partnership and S-Corporations

Sole Proprietorship / Partnerships

Children under 21 wages subject to income tax withholding, but not :

  • Social Security
  • Medicare
  • FUTA

Corporations

Children under 21 are subject to:

  • Income tax withholding
  • Social Security
  • Medicare
  • FUTA

Tax Savings Opportunity

Standard deduction for SINGLE filers raised from $6,350 to $12,000.

  • A child could earn up to $12,000 tax free

Example: Employment Tax on Wages of $12,000

Sole-Proprietor

Corporation

FICA / Medicare / FUTA 16.8% $0.00

$2,016

Reference Material:

Refer to: https://www.irs.gov/businesses/small-businesses-self-employed/family-help

Questions? Email Mark W. Sullivan, EA.


About: Per Diem Plus is a proprietary mobile software application that was designed by truckers and built by tax pros. It is the only IRS-compliant mobile app that automatically tracks each qualifying day of travel in the USA & Canada and replaces ELD backups (logbooks) to substantiate away-from-home travel.

Start your 30-day FREE trial with no credit card required today!

Download Per Diem Plus for iOS HERE

Download Per Diem Plus for Android HERE

This article was written by Mark W. Sullivan, EA, Tax Counsel to Per Diem Plus, LLC and Of Counsel to Schroeder & Associates and leads the highly specialized Tax Controversy Group. His practice is concentrated in the areas of Federal tax controversies and litigation support/expert witness services in tax and other white collar cases. He also advises on tax planning and consulting for businesses and individuals. Mark has 25 years of experience in Federal Collection, Examination and Appeals representation.

Prior to starting a private practice in 1998, Mark was an Internal Revenue Officer with the New York, NY, Saint Louis, MO and Washington, D.C. offices of the Internal Revenue Service

Disclaimer

This article includes general tax information, and therefore may not be relied upon as legal authority. This means that the information cannot be used to support a legal argument in a court case. Please consult with a licensed tax professional.

Proud to be American - Per Diem Plus
Proud To Be American
100% developed, owned, and managed in the great USA!
Follow Us
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram