Category: Tax for Business

PriorTax keeps you current on the most recent tax for business news from the IRS. There’s no need to decipher confusing IRS lingo because we’ve got you covered when it comes to business taxes. Always check back here for information on new business deductions and credits that you should be claiming for your LLC or Partnership. From claiming deductions to filing your return, we handle your taxes while you handle your business.

If you have questions about your business tax, then leave a comment on our blog posts. Our tax experts will provide you with the answers that you need!

Archive for the ‘Tax for Business’ Category

October Tax Extension 2023

Posted by admin on September 14, 2023
Last modified: September 14, 2023

What You Need to Know Before the October 16 tax extension deadline. Tax extension could give you extra time for filing but not for paying. Make sure you file by the October 16th date to avoid any additional charges.

Prior to tax day, the IRS receives millions of extension requests by way of Form 4868. While this does give filers an additional six months to submit their 2022 return, that extra time doesn’t make paying taxes any easier. So be sure you’re still on top of your payment plan!

It’s important to note that even though you may have until October 15 to file your taxes, the payment is still due by April. To better understand how the tax extension deadline works and other related deadlines, here is more info to consider.

It’s no surprise that with tax day quickly approaching, many people struggle to get their paperwork together in time. Last year, the IRS reported that 19 million taxpayers had requested an extension for filing their income tax returns, and the number is expected to be similar this year.

With the October 16, 2023, deadline looming for filing your paperwork, you may have some reprieve from the pressure. Nevertheless, it is important to remember that this extension only gives additional time for filing – less time to pay. Therefore, estimate how much tax you owe and submit it as soon as possible in order to prevent extra fees and interest due to late payments.

October tax extension

What is a tax extension?

Do you need more time to file your federal income taxes? A tax extension may be the answer. When approved, a tax extension can help prevent penalties for late filing with the IRS.

Submitting Form 4868 to the IRS before April 18, 2023, provides an extension for filing taxes that year until October 16. Submitting a payment for any estimated taxes owed is important to avoid additional penalties and interest when requesting an extension. This can be done both online and by mail.

Which states have federal tax deadline extensions?

Due to FEMA-declared natural disasters, certain states have received deadline extensions for federal tax filing and payments. Specifically, this includes individuals’ income taxes, business taxes, and quarterly tax filings. So, what are the affected states?

The IRS has identified certain counties that have been affected by the disaster, and only those individuals living in and businesses established in these areas may be eligible for relief. Generally speaking, this requirement must be fulfilled in order to receive this assistance.

In the event that you were incapable of complying with the tax-filing deadline due to your preparer living in an area affected by disaster or documents for completion of your return being located in said region, You may be eligible for IRS-recognized relief. For more information, visit the IRS dedicated page on disaster aid.

  • Alabama (October 16, 2023)
  • California (October 16, 2023)
  • Georgia (October 16, 2023)
  • Hawaii (October 21, 2024)

Does the tax extension deadline apply to me?

Do the tax extension period apply to you? By submitting IRS Form 4868 before the original filing deadline, you are eligible for a six-month extension until October 16, 2023, to file your taxes. Even though extra time has been provided, paying at least 90% of any tax owed on or before the regular date is important. Otherwise, the IRS could punish you with late payment penalties and interest.

Did you miss the April 18 tax return deadline? You may face both failure-to-file and failure-to-pay penalties, plus interest from the IRS. Not filing for a tax extension before this date could mean your taxes are definitely delayed, according to the agency.

Have I already missed the deadline for the tax extension application?

After April 18, 2023, deadline for tax extension requests has passed and you still haven’t filed your taxes, the IRS advises that you do so as soon as possible in order to avoid penalties and interest that begin to accumulate right away. Furthermore, those struggling to pay their bill can consider various payment plans provided by the agency. There is even a chance of penalty abatement for first-time offenders who meet several criteria.

If I miss paying the taxes by the October tax extension deadline?

Failure to meet the October tax extension deadline comes with consequences. Should you miss it after requesting an extension, then the following will occur:

It’s expensive to delay paying your taxes. Even with a tax extension, the payment due date is April 18th – and interest accrues right away. That means allowing your taxes to go unpaid until October could cost an exorbitant extra fee.

Didn’t manage to meet the April deadline for paying your taxes this year? The IRS late-payment penalty may be higher than usual as a result. Generally, it can be anywhere from 0.5% to 25% of the monthly unpaid amount until the full sum is paid off.

The IRS may impose a late-filing penalty of 5% for every month or partial month your taxes are not submitted on time. This amount can accumulate as much as 25% of the overall amount due to them.

How to file a tax extension

Before the tax filing deadline, you can extend the time to file by submitting Form 4868 electronically or by mail. Alternatively, paying an estimate of what you owe to the IRS with your debit/credit card, IRS Direct Pay, or EFTPS and marking it as a payment for an extension will eliminate any paperwork.

Are you considering a tax extension? PriorTax can assist you from start to finish with filing Form 4868. Contact your dedicated tax professional and explore submitting the form online for free. Upon completing with our free dedicated tax professional, you will receive an email confirmation from PriorTax and the IRS.

IRS Announces Tax Relief for Hawaii Wildfire Victims

Posted by admin on August 31, 2023
Last modified: August 31, 2023

The Internal Revenue Service (IRS) has issued a declaration of tax relief to those affected by the wildfires that began on August 8, 2023, in parts of Hawaii. Individuals and businesses affected have until February 15, 2024, to file returns and make required payments. Consideration is given to victims of the wildfire destruction in these areas of Hawaii.

In response to the damage caused by the Hawaii wildfire, FEMA has declared a disaster in Maui and Hawaii counties. As a result of this declaration, those who live or operate businesses in the affected areas are eligible for federal tax relief.

In response to a declared disaster, it has been made possible for those affected to postpone their filing and tax payment deadlines. An example is when deadlines falling between August 8, 2023, and February 15, 2024, can be extended with special permission from the IRS.

The Internal Revenue Service (IRS) has issued a grace period extending to February 15, 2024, for all affected individuals and businesses who need more time to file tax returns between January 1, 2021 and April 18, 2023. This stipulation includes 2022 individual income tax returns, with an original due date of October.

Hawaii Wildfire

The February 15, 2024, deadline also applies to:

  • Quarterly estimated tax payments, which are normally due on September 15, 2023, and January 16, 2024.
  • Excise tax returns and quarterly payroll which are normally due on October 31, 2023, and January 31, 2024.

Businesses whose 2022 tax extension dates have elapsed or will soon elapse by September 15 (i.e., calendar-year partnerships and S corporations) and October 16 (calendar-year corporations) are eligible for the February 15, 2024 deadline for filing taxes.

On or after August 8, 2023, and before September 7, 2023, any late payroll or excise tax payments will receive abatement as long as the deposit is made by the said date.

When a taxpayer is subject to a late tax filing or late payment penalty notice from the IRS that had an original or extended due date during the postponement period, they should contact the number on the notification for the IRS to waive any charges.

Taxpayers affected by a covered disaster area can receive filing and payment relief from the IRS, provided they reside or have business in those areas. Those located outside of such regions should contact a dedicated PriorTax Tax Professional to benefit from this tax relief.

Who are Affected Taxpayers from Hawaii Wildfire?

Individuals and businesses affected by the covered disaster area, including tax-exempt organizations, are eligible for postponement of time to file tax returns, pay taxes, and perform other time-sensitive acts. This also extends to those who do not physically reside within the area but whose records necessary to meet a deadline lie within it. Thus, they, too, are entitled to some form of relief.

All those providing and receiving help during times of tragedy have the right to compensation for any damages incurred as a result of the disaster. That is why anyone affiliated with an official government or charitable organization assisting people affected by a disaster area is eligible for relief.

Taxpayers affected by the August 8, 2023 date will receive some relief from the Internal Revenue Service (IRS), as they can now file all relevant tax documents until February 15, 2024. This includes individual and corporate income tax returns, partnership and S Corporation returns, estate/gift/generation-skipping transfer taxes, annual information for tax-exempt organizations, and employment/excise taxes with either an original or extended due date up through February 15 of this year.

Taxpayers with estimated tax payments due between August 8, 2023, and February 15, 2024, now have an extension until February 15, 2024, to make those payments without facing any penalties for late payment. Those estimates must be paid before the end of that period to avoid penalty charges.

Declaring Casualty Losses from Hawaii Wildfire

For individuals impacted by a federally declared disaster, the option to declare casualty losses on their federal tax return for either the year of the occurrence or the previous year is available. Taxpayers who have selected this option and are reporting these losses on their 2022 returns have extended time until October 15, 2024, to make that choice.

Hawaii Wildfires have caused some taxpayers to seek out the disaster loss on their tax return. Make sure to state “Hawaii Wildfire” and the FEMA disaster declaration number, DR-4724-HI, at the top of your form. A PriorTax Tax Professional can assist individuals through this process from start to finish.

Other Possible Tax Reliefs

Taxpayers affected by disasters may find financial aid within their retirement plans or IRAs. For example, they could qualify for a special disaster distribution to spread the income over three years and avoid the extra 10% early distribution tax.

Those who pay taxes could qualify for a hardship withdrawal in certain instances. Every plan or IRA has separate rules and guidelines that must be adhered to by its participants.

The IRS may provide additional disaster relief in the future.

Taxpayers dealing with the repercussions of a disaster that the IRS has contacted in regard to a collection or examination should make their situation clear to the agency so that they can be given appropriate consideration.

Do I Need Tax Return Amendment?

Posted by admin on July 27, 2023
Last modified: July 28, 2023

You’ve noticed errors or exclusions made on the tax return? It’s possible to do tax return amendment after submitting your original tax filing. Normally, the IRS would catch any mistakes during processing, but in certain scenarios, you may need to file a tax amended return in order to make corrections or make other modifications to the tax return itself.

This year, some of the changes to tax laws set by Congress apply to previous years’ taxes. This raises the question of whether you should go ahead and file an amended tax return or not. Understanding how to redo your taxes is key in determining which option is best for you.

tax return amendment

Do You Need to Revise Your Taxes This Year?

Have you ever submitted your tax return and discovered you’d made a mistake or learned new information that would alter the outcome? You may have asked yourself, is it possible to redo my taxes?

With the enactment of numerous new tax rules for 2018, it is important to consider whether it could be beneficial for you to submit an Tax Return Amendment. Many of us have confronted this issue before. To clarify matters, here’s a guide on filing an amended tax return and the benefits it could bring.

It is important to file an amended return in certain scenarios. This includes when corrections or omissions are needed to your income, a change of filing status, modifications to deductions, and the desire to apply for or adjust a tax credit.

Taking the time to submit an amended return can be a worthwhile effort. It ensures your tax return is up-to-date, enabling you to get the most out of any potential refund or lower what you owe. Moreover, it will reduce the chances of drawing attention from the IRS in the form of audit notices.

A Few Tax Return Amendment Scenarios

Scenario 1. You filed your taxes and then received another W-2 or other income statement.

In some cases, after you have already submitted your tax return, a new income statement could appear. This could include a W-2 from a job held only for a short period of time or even an interest statement from an account you had completely forgotten about. Even though the amount on the form may be small, it can still influence how much you owe in taxes.

Before filing your taxes, you must report all of your income for that year in accordance with IRS regulations. One way to do this is to amend your tax return, and it’s important to ensure you have received all necessary documents first. To comply with legal requirements, employers and businesses must send out all income statements such as W-2s or 1099-MISC by January 31st of each year.

Scenario 2. You missed claiming a credit or deduction you were eligible to receive

Forgetting to claim a credit or deduction can be costly when it comes to taxes. Even though you have the ability to take advantage of various credits and deductions that could lower your bill, not claiming them might mean losing out on money. It’s possible to file an amended return in order to get those dollars back.

When you have paid college tuition during the tax year, there are two credits that could potentially be claimed: the American opportunity tax credit and the lifetime learning credit. Filing your 1040 is not enough, though – an amendment needs to be filed in order to claim educational credits.

Major Tax Breaks from Tax Reform

Tax Reform Aids Taxpayers with Tax Breaks

Taxes on any income and gains must be paid as part of the taxation system. Consequently, in order to incentivize certain activities that are beneficial for society, Congress has implemented tax breaks which can lessen the overall duty a taxpayer is obliged to pay. Therefore, it is highly recommendable to get an up-to-date understanding of all changes, credits, and extensions prior to submitting an Amended Tax Return form.

How To File a Tax Return Amendment

Need to make some adjustments? Filing an amended return is the way to go. To get started, you’ll fill out Form 1040-X, Tax Return Amendment, and attach any corrections or additional documents that weren’t included with your original return. Doing so will bring your filing up-to-date with accurate tax information. Changes to federal returns filed in 2019 and later can be done electronically.

As laid out by IRS regulations, you have up to three years from when your original tax return was submitted to submit an amended return with a claim for tax refund. Additionally, two years is also allowed for filing after outstanding tax has been paid. It should be noted that any returns sent prior to its due date (with or without extensions) are considered as having been filed on that day. Furthermore, withholding taxes from sources such as a W-2 is counted as payment towards taxes on their due date.

Since the implementation of tax reform, it is crucial to address any issues that have arisen as a result. Filing an amended return is the best way to rectify mistakes and fix oversights. Therefore, it is essential to act promptly in order to set yourself up for success in the future.


In order for adjustments or corrections of a previously filed tax return, the appropriate form is Form 1040-X: Amended Tax Return. This must be accompanied by any documents that were not included in the original submission. Since 2019, amended federal tax returns can also be lodged electronically.

In the event of an oversight or mistake on your original submission, filing an amended tax return can be a wise move. This will allow for revision in terms of income declared, filing status, deductions taken, and claiming/correcting any tax credits owed. According to the IRS rules, however, anyone wishing to claim a refund must submit their amended return within three years from when they originally filed the return – OR – two years from when they settled their outstanding taxes (whichever is later).

Get your taxes done efficiently and accurately with a free PriorTax Dedicated Tax Professional. Whether you prefer having an expert guide you through the process from start to finish or taking advantage of the easy-to-use tool for self-filers, you can trust that PriorTax will guarantee your maximum refund. With our help, filing your taxes can be a breeze – answer straightforward questions, and we’ll ensure everything is taken care of so that you can rest assured knowing it’s been done right.

How Can You File Your Business Taxes?

Posted by admin on June 1, 2023
Last modified: June 2, 2023

Business tax filing can vary depending on the type of business structure in place. To ensure that your business taxes are done correctly, there are some key steps that should be taken first to establish what type of business setup has been used:

What timeline should you be following to do your business taxes?

Need a hand in filing your business tax online? First, let’s see when you need to file your taxes.

business tax

Sole proprietor or Single Member LLC:

For many gig and freelancers, operating as a single-member Limited Liability Company (LLC) or as a Solo Proprietor is preferred.

Partnership or Multi-Member LLC:

An LLC or a business formed as a “partnership-multi member” is not taxed as a corporation but instead has multiple owners.

S Corporation:

An entity with the legal status of a corporation may selected to be taxed as an ‘”pass-through entity,”‘ such as a partnership or LLC.

C Corporation:

When a large business requires its own separate legal identity, they often form a type of company known as a ‘Corporation.’ This entity exists independently of any owners and carries its rights and responsibilities.

Trying to figure out which form to file and when can be a complicated task, especially depending on the entity’s structure. Business taxes may either be paid by the owner or the business itself – this all depends on what legal setup has been established. Furthermore, every type of entity has its own IRS form and filing deadline that must be adhered to.

Business Tax Filing for Sole Proprietorships

Sole proprietorships are the most simple and straightforward type of business tax filing. You can confidently fill out Schedule C, which is only two pages long. This form is attached to the 1040 individual return, which is then filed with tax authorities. Being this simple, tackling this task via tax software or by hand is a safe bet.

To complete your taxes, the following documents are essential:

  • Schedule C: Profit or Loss From Business
  • Schedule SE: Self-Employment Tax

Additional paperwork will be needed should you specify a home office deduction or account for depreciation, such as:

  • Tax Form 8829: Expenses for Business Use of Home
  • Tax Form 4562: Depreciation and Amortization

Filing a business tax return on Form C is usually quite uncomplicated, but certain elements can be confusing. For example, you may need to grapple with the Qualified Business Income Deduction. Again, business tax is an area where it can be useful to have the professional help of an experienced service for filing taxes.

Business Tax Filing for Simple Partnership

It’s advised to avoid taking the DIY route when it comes to business partnerships. Those kinds of entity structures tend to be complicated, which is why you should use software or consult a professional instead. In addition, when filing individual income taxes, you’ll need to fill out a K-1 form to let the IRS know what part in the partnership you have and how much money was earned through it.

To comply with the K-1 filing requirement, it’s important to maintain a record of how much of the company each partner possesses according to their individual contributions. This is known as the basis of the partnership. Losses or profits for tax purposes must be allocated accordingly among partners based on their basis in the business.
Do you know when a tax return is considered simple? To understand this, it’s important to define a simple partnership.

So, how does one identify whether or not they have one?

Are you worried about having to report a Balance Sheet on your tax return? To be in the safe zone, confirm that these two statements are true: Your gross income is less than $250,000, and business assets are under $1 million. When both of these business conditions have been met, there will be no need to submit a balance sheet detailing all assets and liabilities as part of taxation. Doing so requires good bookkeeping skills for accurate documentation annually.

When running your own small business, nailing down the financial details is not easy. While keeping accurate books is essential, getting the bottom line accurately can be difficult. Attempting this manually isn’t recommended.

When should you seek help from a Dedicated Tax Professional?

Hiring an accountant in the business world shouldn’t be taken lightly. Doing so should be something other than a trial and error process, as even the slightest error can lead to serious repercussions further down the line. Avoiding such a “fake till you make it” approach is essential for successful financial management.

Prior Tax has free dedicated Tax Professional support to walk you through your business tax filing step by step from start to finish. Don’t hesitate to reach out and find your dedicated tax professional.

When it comes to tracking the financial side of your business, finding the right professional help can save you from costly mistakes. This is especially true when your company runs on an accounting method other than “cash”. Whether it’s accrual or hybrid accounting, hiring an accountant is wise. The complexities of these models can often be difficult to manage; even experts may make errors that could end up costing you problems in the long run.

Fix your Tax Returns to Make Sure Your Federal Tax Return is Accurate

Posted by admin on May 25, 2023
Last modified: May 25, 2023

It’s not unheard of for additional information to arrive after you’ve already filed your taxes. This can be something like overlooked credits or tax form 1099 arriving too late in the season. Fortunately, the IRS has created an easy way to fix your tax return by amending it.

It can be difficult to ensure your tax return is accurate and complete. To help with this, it’s important to gather all necessary documents such as W-2s, 1099s, receipts, etc. Thus you can be sure that all the relevant data are input into the right schedules and forms before submitting.

How can you fix your tax return?

First, beginning the tax season can be daunting; however, getting ready is made much simpler by taking a few steps. Firstly, it’s important to assemble all your new paperwork. This includes any receipts for deductions and credits you are claiming, such as 1099s or W-2 forms that may have been missed initially. It never hurts to keep a copy of your previous year’s return handy too!

fix tax return

Second, once you have completed the first stage, forming 1040-X is your next task. From 2019 onwards, fixed federal tax returns can be submitted electronically as long as the initial one was sent this way. Those who filed theirs with TurboTax should log onto their account and pick out the tax return needing amendment; then, they must adhere to the onscreen directions.

The third and final task is determining what alteration needs to occur. To be able to accurately adjust the mistakes on your original tax return, you must get an unaltered copy of the same form from that year. With this in hand, you can modify those numbers which were impacted by making amendments – thus recalculating your taxes.

In preparing to fix your tax return’s fourth and final stage, grab any new schedules or documents you need to make changes. Unlike submitting a full tax return, only figures that have changed should be updated with the IRS; there’s no need to start from scratch again. However, in the event that any of your original filings will be subject to alteration due to an amendment, it is necessary to re-submit those schedules together with your Form 1040-X. Fortunately, Prior Tax can provide assistance in this process – a team of dedicated tax professionals are there to help you revise the required forms with ease.

To complete the process, you must fill out Form 1040-X. It is vital to explain precisely why you are filing this form. Furthermore, should you file the return on paper, be sure to attach any related documents supporting your cause and mail them off according to the instructions on Form 1040? When submitting an amended tax return, make sure to send it to the IRS service center, which handles your first filing. In addition, you must include payment for any extra taxes due; otherwise, the IRS may impose interest and penalties on the remaining amount.

Using PriorTax to fix your tax returns

At Prior Tax, we understand that the process of amending a return can be complicated. To fix your tax and file for tax amendment.

Don’t worry about filing taxes on your own – Prior Tax has got you covered! With Live Full Service, an expert will take care of everything, start to finish. Take advantage of Dedicated Tax Professionals for the right answers and a maximum refund guarantee. Or opt for confidence-building tax filing with Prior Tax easy filing process or with the help of our dedicated tax professionals. Whichever way you go, get a guaranteed maximum refund from Prior Tax.

Take Advantage of Computer Tax Write-Off Opportunities

Posted by admin on May 18, 2023
Last modified: May 19, 2023

We can’t deny the usefulness of computers – they are everywhere, from our homes, businesses, and schools to soon enough. As such, you may be able to take advantage of computer tax write-offs. So let’s explore what’s available.

It’s a wonder that they haven’t taken control of the planet yet, considering how often people hit the “Remind me tomorrow” button when asked to update. Yet, no matter how much we can accept this inevitability, one concern continues to linger in our minds: can we deduct them from our taxes?

Reach out to your dedicated tax professionals for free consultation and tax filing from start to finish.

Did you know you can claim your computer as a tax deduction?

The simple answer: Yes. Any computer used for business-related activities can be written off as an expense.

In 2018, the Tax Cuts and Jobs Act (TCJA) removed an important deduction for W-2 employees: write-offs for business expenditures. Therefore, to cover costs associated with work such as a computer, it is recommended that you ask your employer to reimburse you.

Calling all freelancers and self-employed workers, laptops might be the perfect addition to your office. Before you make the purchase, however, take a moment to consider the details. Remember that you can only deduct the business-use portion of the laptop from taxes.

Are you one of the people using their own laptops to run a business? Then you need to accept the fact that it limits your possible deductions. To give an example, let’s assume that in a day, you spend two hours on your business and eight hours watching YouTube. In this scenario, 20% of the usage time of your computer is allocated for work purposes.

In a notable shift, the Internal Revenue Service (IRS) has removed “computers” from its list of “listed property.” Such property is any item that could be used for both personal and business purposes, like automobiles. As a result, there are now different IRS regulations to take into account.

business computer tax deduction

The exclusion of computers from the category affected two matters:

Firstly, it abolished the need for detailed recordkeeping when claiming the deduction. This is because taxpayers no longer have to keep track of their use of the computer in order to be eligible for this tax benefit.

Secondly, it conformed with conventional depreciation regulations that allow for greater convenience and flexibility; I will break down what this entails below.

Learning the Concepts of Computer Tax Depreciation

Now that you’re familiar with the tax filing process of calculating your business’s portion, it’s time to take a deeper dive.

The IRS generally states that computers are capitalized and depreciated over five years – this is known as depreciation. This method helps account for an asset’s decreasing value over its lifetime.

When it comes to depreciation, many people tend to think of cars. However, when you buy a car, the resale value tends to decrease with time. Why is that? This is because, over time, the car will gradually become subject to more wear and tear, which reduces its overall performance and puts it at a disadvantage compared to newer models in the market.

As with most technology, the value of a computer decreases over time. That is why depreciation comes into play – it spreads out the cost of purchasing a computer across its “useful life” to account for this decline in performance.

Do you want to be able to tax deduct the entire cost of your computer right away?

Well, the IRS has some solutions for that! Specifically, they have a few methods in place to help people who want to see their deductions before tax season. This is known as “accelerated depreciation,” and it allows folks to get their expenses back sooner rather than later.

Fortunately, you can avoid any hassle of figuring out depreciation when it comes to purchasing a computer, provided certain criteria are met. Maximizing your deductions when you purchase computers under $2,500.

By taking advantage of the IRS’s de minimis safe harbor election, it is possible to write off the cost of any tools or equipment that costs $2,500 or less in the first year of using the equipment. For example, should you acquire a computer for $2,500 and use it 20% of the time for business purposes, you may claim up to $500 as a deduction.

This process does not require you to depreciate it or include it as a fixed asset; rather, treat the expenditure like any other business cost. Additionally, a formal election should be included with your return every year – this cannot be carried over from one fiscal period to the next.

Taking advantage of Section 179 to Tax Deduct on Computers.

Section 179 has been established to motivate entrepreneurs to buy their company’s machinery and equipment, including computers. It allows you to deduct as much of your expenditure as desired in one year up until an overall limit of $1,040,000.

When it comes to selecting a tax strategy, one of the best options is to determine whether or not it’s advantageous to depreciate certain items.

Two things to consider when taking Section 179 for Tax Deduction:

First, though it is not possible to deduct a loss when claiming, those whose computers are used at least half for business can still take advantage of the allowance. Additionally, even for those who use their computer less than 50% for work, taking the benefit of de minimis or bonus depreciation is still an option. Let’s explore these two further.

Second, deciding whether or not you should depreciate your computer can take time and effort. Although the IRS has structured their rules in such a way as to avoid requiring this, there are some instances in which it may make sense to go ahead and do so. In fact, taking this route can offer more wiggle room.

Tax planning for the upcoming year can include creating a sound strategy for the depreciation that may benefit you from both a cash flow and tax perspective. For example, instead of spending money on an upgraded printer for the sole purpose of taking a write-off now, delaying the purchase provides an opportunity to use up $400 in deprecation costs.

For those trying to reduce their computer’s value, bonus depreciation is hands down the most straightforward solution. A few other possibilities can be explored, but this is the easiest.

Using the Bonus Tax Depreciation

The Tax Cuts and Jobs Act has presented a great opportunity in the form of bonus depreciation. By taking full advantage of this new feature, you can receive a deduction for 100% of the cost associated with purchasing business-use items during the first year. In addition, there is no need to fill out any forms or submit documentation – bonus depreciation is automatic!

When it comes to simplicity, nothing beats claiming a deduction through the use of depreciation. All one needs to think about is when to take advantage of this special allowance – whether that be in the present or spread out further into the future. Note, though, with the Tax Cuts and Jobs Act (TCJA) lifting a prior limit on net operating losses (NOLs) – i.e., losses which may be applied against any future profits earned – deferring said claim is less essential than it once was.

In the event that you incur a net loss of $20,000 stemming from your claim of bonus depreciation on office equipment, this financial setback can be applied to any future gains in perpetuity.

Unfortunately, bonus depreciation has a minor downside that will only affect some freelancers and self-employed individuals drastically. This method must be used for all business assets belonging to the same grouping or “asset class”.

You can either choose to adjust the depreciation of your computer, which is expected to last five years or opt for a different schedule on other assets that degrade over a similar period. This could be anything from cars and trucks to more unusual business-related purchases such as planes and cows! Note that you can also select seven or 10-year asset schedules when it comes to boats, railroad cars, and farm machinery.

Should you find yourself subject to this bizarre limitation, you can still take advantage of Section 179 depreciation for your computer.

Tax Writeup on Depreciation with Section 179

Recent NOL legislation revisions have taken away many of the advantages associated with Section 179. In almost all cases, bonus depreciation is the more favorable choice over its predecessor. Nevertheless, it is still possible to take advantage of depreciating your laptop or desktop using Section 179.

If you acquire $4,000 worth of computer systems for your new home office and net $3,000 in income for the year (before computing the computers’ cost), a Section 179 election could be beneficial. This would enable you to offset any self-employment earnings and divide up the remaining $1,000 over the asset’s lifetime – depreciating it.

How to Prepare Amended Tax Return

Posted by admin on May 11, 2023
Last modified: May 9, 2023

Need to Fix a Mistake on Your Tax Return? Here’s What You Need to Know

Amending your tax return is simple – all you need to do is e-file an amended tax return with Prior Tax. It requires just a few steps, but it can make all the difference in getting the credits and deductions you deserve.

Correcting errors and amending your tax return can be done using Form 1040-X. This form can help you report changes such as correcting your filing status, including or removing a dependent, claiming deductions or credits that were missed or even adding income that was forgotten. However, it is important to note this form should not be used for any clerical errors; these will automatically be corrected by the IRS.

Normally, it’s necessary to submit an amended return no later than three years after the original submission deadline. However, this could be extended to two years from the payment of taxes for that particular year, should that fall at a more recent date.

how to prepared amended tax return

Did you know that it’s possible to make corrections on prior tax return? 

The IRS allows taxpayers to amend their returns when mistakes or oversights have been made. Read on for more information about what’s involved in filing an amended tax return.

Knowing the proper time to file an amended tax return is key. In certain circumstances, this must be done, while in others, it’s unnecessary. Here are some scenarios that necessitate an amendment:

It suddenly dawns on your that a tax deduction or credit was not claimed, and the wrong filing status was declared.

It turns out there’s a missing dependency to be included in the return and an income source not previously accounted for.

Uncovering that an expense, deduction, or credit already claimed is no longer applicable is another issue to solve.

It’s important to ensure the IRS has finished with your tax return prior to submitting an amended one – that way, there will be clarity regarding which is the original and which is revised. A good indicator of this is a received tax refund; once you’ve gotten your rebate, you can be confident that the agency has dealt with your filing.

Do you ever need to submit an amended tax return?

Generally, it’s unnecessary to resubmit a tax form you have already filed with the IRS or amend your tax returns just because of some minor math or clerical errors. The Internal Revenue Service typically takes care of corrections for such mistakes on its end. It will send an additional bill for taxes or offer a refund in cases where the error was advantageous to the taxpayer.

Have you made any mistakes on your past tax returns? Filing an amended tax return may be the solution. The Internal Revenue Service (IRS) could audit previous years’ taxes, which might result in extra taxation. According to regulations, the IRS usually scrutinizes files filed within the last three years; however, addressing any potential issues before prior tax return(s) becomes a problem is preferable. Amending a filing can easily remedy errors that were previously made.

Submitting your amended tax return as soon as possible is highly recommended. Doing so can help reduce the possibility of owing taxes and any applicable penalties. Additionally, it will ensure that you are prepared for any issues that may arise with the IRS.

Are you aware of the time frame to file an amended tax return?

The Internal Revenue Service (IRS) dictates that an individual can only file an amended return to claim a refund within the following:

A period of 3 years from the deadline for primary tax filing, or within 2 years of paying the tax owed for that tax year – whichever date is latter. Unfortunately, requesting reimbursement after these specified timescales have passed is impossible.

Have you ever needed to make a correction to your tax return? 

Submitting an amended return is relatively simple, and this guide will provide all the steps necessary. Here’s what to do:

First off, it’s essential to gather the proper paperwork for preparing an amended return. You’ll need your original tax return and any necessary updated documents.

You may require new or amended documents, such as a W-2 or 1099 form to revise the income reported on your return. Additionally, should any overlooked tax deductions or credits come to mind, supporting documentation would be needed to apply them; this could take the form of receipts for charitable donations, amended Form 1098 Mortgage Interest Statement forms, and even Form 1098-T for education credits.

Obtaining a transcript from the Internal Revenue Service is an option for those who did not file a tax return using Prior Tax and don’t have a copy of it. The Get Transcript tool available on can be used for this purpose, which provides most of the necessary details from the return like income, deductions, credits, and so forth.

The next move is to obtain the pertinent paperwork.

For example, to amend a tax return, you must file IRS Form 1040-X. Additionally, any forms affected by your modification should also be kept on hand. For example, to alter itemized deductions, it’s vital to possess a copy of Schedule A for that particular tax year.

Amending your tax filing may require additional forms based on the type of income added. For instance, Schedule B is likely necessary when adding more interest or dividend income. When it comes time to change revenues or expenses from a trade or business, you’ll need Schedule C and Schedule SE. Meanwhile, Tax Form 8949 and Schedule D would be used for updating capital gains/losses. And so forth.

In order to file an amended tax return via Prior Tax, it is necessary to use the appropriate version of the program. So, for instance, when altering your 2020 tax return, one should employ the 2020 edition of PriorTax.

Even though you did not use Prior Tax to file your initial tax return, it is still possible to use it in order to complete an amendment. You will need to start by entering the same information into Prior Tax that was filed initially and then move forward with the amendment process.

After you have gathered the necessary receipts and documents, the next crucial task is to complete Form 1040-X. This particular form consists of three columns that must be filled out accurately.

Column A is where you enter all your figures and information as reported on your tax return.

The information in the third line of the return should be filled out accordingly. This is where you will enter the changes from your original return. Take, for instance, an amendment on your gross income to include $100 of interest income that had been left out initially – in this case, $100 should be written in Line 1, Section B. The total amount should then be placed in Section C; by summing up what was entered into A and B.

When filing Form 1040-X, Section III requires a thorough explanation of why an amendment to the original return is being made. Therefore, it’s important to provide detailed insight into the purpose of your revised tax filing.

Filing an amended return doesn’t have to be a difficult process. 

With Prior Tax, you can get help from free dedicated tax professionals without needing to memorize all the details. All you have to do is let our dedicated tax professionals know that you require a Form 1040-X, and they’ll make sure any adjustments to your income and deductions are accurately filled out on the right paperwork.

Lastly, send in your amended tax return. Once you have finished completing the necessary forms, it’s time to submit them. As of 2019, taxpayers are able to e-file their amended tax returns so long as the original return was filed electronically and your tax software partner supports sending amended documents in this manner.

Certain supporting documents are necessary to validate the changes for those filing an amended return. This could include W-2 or 1099 forms to report extra income, a Tax Form 1098 Mortgage Interest Statement that has been updated, or even a 1098-T for the purpose of claiming education credits.

Self Employment Tax Write Off

Posted by admin on March 30, 2023
Last modified: March 29, 2023

When you work for yourself, the need to plan for taxes can’t be overstated. Therefore, we always suggest that freelancers store away 20-30% of their income to pay what they owe in taxes. This should cover taxes due from both income and self-employment sources. The key is planning ahead of the IRS and keeping better track of income and expenses throughout the year. As a freelancer, you’ll likely be able to deduct typical household expenses from your taxable income. For example, you can deduct any work-related expenses you spend on business-related items such as cell phones, Internet service, software, and office supplies. You may also be able to benefit from self employment tax write off some home office expenses.

Why Do self-employed pay more in taxes?

Are the tax regulations different for self-employed individuals? The short answer is a resounding yes. The more extended response is that there isn’t a huge difference, but it can certainly seem like it. Self-employed people have to pay increased Social Security and Medicare taxes, yet they are also allowed certain write-offs to counterbalance this additional expenditure. However, due to the absence of tax deductions being taken out, their overall tax bill might appear excessive.

Self Employment Tax Write Off

Are Self-employed paying more in FICA taxes?

Individuals working for themselves are subject to a higher FICA tax rate than those employed by a company. Specifically, the total percentage of Social Security and Medicare taxes they must pay is 7.65% greater than that traditional W-2 employees are required to pay – an amount that can add up significantly over time.

Self-employed claim business tax write-offs.

One of the major benefits for those who are their boss is the ability to take advantage of beneficial business tax write-offs. These write-offs often mean that a person who works on their ends up owing less taxes than someone with a W2 job. Unfortunately, however, only some know how to utilize these deductions advantageously.

Self-employed do not get tax withholding.

One unexpected challenge for freelancers, gig workers, small business owners, or independent contractors is that their taxes are often much higher than traditional W-2 employees. This is because most workers in this category don’t have any tax withheld from their salaries. As a result, when filing their taxes, many are surprised at how much they need to pay the IRS. On the contrary, W-2 employees usually have Social Security, Medicare, and income taxes are taken out of each paycheck throughout the year. Therefore they generally receive a large refund once it’s time to file their returns.

Those freelancing or operating as independent contractors need an employer to take care of their taxes. It can be a nasty surprise when realizing how much they owe as they file their taxes. Those who were used to the W-2 lifestyle they’re now paying more in taxes; however, it’s just that they are paying all of it in one go.

So, what taxes do self-employed need to prepare?

When it comes to filing taxes, self-employed individuals face the dilemma of paying two distinct types: income and self-employment tax. But just how much will be levied on your earnings? Generally speaking, all incomes are subject to income tax.

Are you aware of the income tax expenses?

Income tax applies to wages, business income, interest, rent, and pensions – almost any type of income. As such, self-employed individuals will likely be in the 10-22% range for their tax bill. The average rate is usually 14%.

Why you shouldn’t use your effective tax rate to budget?

There may be better ways to budget than the effective tax rate because the calculator results show a much lower percentage regarding federal income taxes. To explain this further, an example will be used – say you earned $50,000 from self-employment. The top income tax rate for this amount is 22%. This does not provide the whole picture, though, as other factors must also be considered – such as your standard deduction, which will reduce what you owe at tax time.

This information needs to indicate what your actual tax rate will be. It is rather meant to show how much of your income must be put aside when filing taxes.

Important tax breaks that will lower your taxes‍

Knowing how much will be taken off your income taxes can provide beneficial information. However, to understand why two rates may not match up, one must first know what is subtracted from a person’s taxable income. These subtractions include a standard deduction of $12,950, half of the self-employment tax amounting to $3,672, and a qualified business income deduction equaling $9,600.

Your standard deduction ($12,950)
Half of your self-employment tax ($3,672)
Your qualified business income deduction ($9,600)

After subtracting the necessary amounts, your taxable income should be approximately $22,000. This will likely place you in the 12% tax bracket.
To ensure that you can pay your taxes, allotting 5% of your total earnings ($48,000) is recommended. Nevertheless, this doesn’t mean that it’s all there is to taxation.

What do you need to know about self-employment tax?

Two government programs, Social Security and Medicare, collect a self-employment tax from working individuals that don’t have an employer. In these cases, the tax is collectively known as “self-employment taxes,” with a combined rate of 15.3%. This type of tax differs from income taxes because it only applies to business income reported on a 1099 form. On the other hand, those people who do have employers are subject to “FICA taxes,” which are automatically deducted by their employer from their paychecks.

Why not all business income is subject to self-employment tax?

Not all business income is liable for self-employment tax – only net business income. This means that the remaining amount is subject to taxation after any relevant deductions, such as inventory purchases or phone bills. To this end, utilizing write-offs can be an excellent way to reduce total taxes due on income earned from a trade or profession.

For the most accurate prediction of your taxes, you must use the net monthly self-employment income in the corresponding calculator.

How to find tax write-offs with PriorTax?

Do you need help getting the most out of your tax write-off options? PriorTax offers a range of services to ensure self-employed workers take advantage of all available deductions. Our team provides an end-to-end solution so that you get everything when it comes to filing your taxes.

How to budget for self-employment taxes?

Creating a budget for self-employment taxes is essential in the United States. This is due to the “pay-as-you-go” tax system that requires taxes to be paid as money is earned, not when filing taxes. Therefore, to avoid penalties and interest, anybody expecting to owe more than $1,000 in taxes should make estimated payments during the year. Doing so ensures they are not fined when they file their final tax return.

Money management can often feel like a daunting task, especially when money is tight. Nevertheless, setting aside funds for tax payments can be achieved with the right strategies and avoiding certain financial pitfalls. Here we present some time-tested methods that have proven effective for keeping yourself on track financially.

Discover how to maximize your income. For those starting as self-employed, a W-2 job often serves as the initial point of reference for what constitutes a competitive wage. Yet things can feel uncertain when they take the plunge and become their own boss.

One common mistake that is made is neglecting to consider things such as taxation, leading to an underestimate of their price and therefore undercharging for their services.

There is no doubt that it’s time to raise your rates. It is important to add a mark-up to every invoice you issue so that you can cover the self-employment taxes. Always underestimate yourself, and make sure you are paying attention to your services. Each time you submit an invoice, ensure that there is sufficient payment for the work performed.

Establishing a payment plan that suits you best

Surprising to some, there is no obligation to make estimated tax payments on the exact due date. Instead, paying as often as required is possible to stay on top of things.

Many individuals favor making regular biweekly or monthly payments to avoid holding onto their taxes for too long. Plus, with a set schedule, it becomes easier to become accustomed to the process and avoid relearning the procedure each quarter.

Gaining control with auto transfers

Like enrolling in a gym membership without much thought, taking advantage of auto transfers is an easy way to put money away for yourself. In addition, many banking institutions provide the opportunity to move funds from one account to another automatically – making saving for taxes effortless and stress-free.

Change it up with a new bank

Instead of making your savings account too easily accessible, why not open an account at a totally different bank? That way, you’ll need extra effort to transfer money. On the other hand, all it takes is a single click of the button, and funds are moving back and forth – so adding an extra layer might be desirable.

Self Employment Tax Filing in 7 Steps

Posted by admin on March 24, 2023
Last modified: March 25, 2023

Don’t let the thought of tax filing your self-employment tax gets you down – it’s actually easier than you think. Here are 7 simple steps to make sure your hard-earned money is going exactly where it needs to go. So, gather up your forms and keep those lips curved upwards as we walk through the process together!

Whether you’re a freelancer, gig worker, or independent contractor, understanding the correct way to calculate, pay and file your self-employment taxes is essential for anyone who has their own business. By following these steps, you’ll be able to make sure all of your IRS requirements are met with minimal stress involved!

self employment tax

Step 1. Self-Employment Tax Filing

It is important to determine when you need to pay self-employment tax. Individuals who are

– sole proprietors,

– independent contractors,

– freelancers,

– small business owners,

– gig workers or

– have a side hustle may all be liable for this type of tax.

This applies regardless of it being your primary source of income. For example, even though you are employed in a 9-to-5 role, any money earned from selling handmade jewelry on Grailed, eBay or Etsy still needs to be taxed accordingly. Ultimately, all forms of “earned income” – meaning money exchanged for goods and services – should be included in the self-employment tax payment plan.

Are you aware of the self-employment tax rate?

Self-employment taxes are necessary for those running their own businesses and include Social Security and Medicare. Normally, these payments would be withheld directly from W-2 employees’ wages. However, since freelancers don’t have employers, they need to take care of this themselves. So, unfortunately, it adds an extra 15.3% to your federal and state income taxes.

Step 2. How Much Have You Earned?

Before you can accurately calculate your taxes, having a well-recorded set of your income from the year is essential. Many customers and third-party platforms such as PayPal or Stripe will send out end-of-year tax forms that can provide helpful information.

Essential documents to review include 1099-NEC (for those who earned more than $600 from a single client) and 1099-K (for those in receipt of payments via a third-party payment processor). By January 31st, these should be sent out.

Additionally, it is prudent to thoroughly review bank statements to check for any income that may not have been reported on their end but is still taxable. This should include anything below the $600 reporting threshold.

Step 3. Gather and Add up Your Expenses

The third essential part of getting your taxes done right is to tally up all your business expenses. Again, it is highly recommended that you already have connected with a Tax Professional from PriorTax, to track your expenditures during the year. Therefore, while reviewing your banking information and credit card purchases, be sure to pick out any costs related to running your business.

Tax filing for self-employed workers may be daunting, but having a clear idea of your annual business expenses is key. In addition, knowing what to write off from your gross income simplifies the process – have no fear, though! Download our app and connect accounts for an easier tax season.

Some typical deductions are:

 – Your phone bill

 – Office Supplies

 – Computer and software

 – Continuing education costs

 – Auto expenses associated with business activities

 – Marketing and advertising charges necessary to secure new customers.

By determining how much you’ll actually be taxed on after reducing your gross income by all applicable business costs, you can ensure that everything has been calculated correctly and accurately as the end of the year draws near. So don’t feel bad about leaving things until the last minute – it’s a typical situation for freelancers and self-employed individuals!

Step 4. Calculating and Estimate your tax debt

As a freelancer, come tax season, you may be feeling the pressure, particularly because of the 15.3% self-employment tax that you are liable for. This can make your tax bill unexpectedly high compared to when you were previously employed with someone else.

W-2 employment has its advantages regarding taxes in one regard: less surprises at payment time. The IRS automatically withholds income and FICA taxes from employee earnings and remits them at the proper time. That kind of convenience is not available as easily to self-employed people, so they have to make extra effort to make sure everything is up-to-date and accurate to know how much they owe on their taxes.

Figuring the amount of your freelance tax

Do you remember taking on steps 2 and 3? You can now make use of all that work! To compute your SE tax, you must first figure out your net income. This means subtracting all your business expenditures from your total income.

For instance, you bring in gross revenue of $10,000 with $5,000 for business expenses. This would give you a net income of $5,000. Your SE tax will then be based on this amount: in this case, it would be about $765 ($5,000 x 15.3%).

Step 5. Understanding your tax schedule

It might come as a surprise to some, but taxes are not due on April 15th. Instead, the time of payment is determined by when income is earned. Employers consider this requirement by remitting their payroll taxes throughout the year.

Independent contractors and freelancers, however, need employers to process these payments for them. It is often incumbent upon them to submit estimated tax payments each quarter in order to keep up with tax requirements. These payments must be delivered no later than the fifteenth business day of the month following the end of a quarter:

Quarter 1 January-March, must be paid by April 15th;

Quarter 2 April-June – July 15th;

Quarter 3 July-September – October 15th; and

Quarter 4 October-December – January 15th.

Are you expecting to owe more than $1,000 in taxes to the IRS? Making quarterly payments is essential, or you could face underpayment penalties. It’s important to work out exactly how much should be paid by the due date. To this end, why not try our quarterly tax calculator – it can help clarify whether payment is even necessary for you.

Step 6. Which Taxes Do You Have to File?

It is important to assess whether you need to file taxes or not. Individuals with solely W-2 income and earnings of less than the standard deduction ($12,400 for 2021) do not have to worry about filing a tax return.

Those who are self-employed, however, may be less fortunate. The IRS calls for those with net earnings of $400 or more to file a tax return as a way to collect their self-employment tax – even though there may be no income tax due at this rate.

Step 7. Start Tax Filing with PriorTax 

Completing your tax forms is an important part of filing your annual return. Here are the documents to be aware of:

The 1040 Tax Document

This is a document that will be familiar to many people. The Tax Form 1040 is the structure that individual taxpayers use in order to identify all their taxable income and figure out what taxes they owe accordingly.

Schedule C

Those who report self-employment income are obligated to submit a form known as “Schedule C.” With this document, individuals must provide documentation of both their gross business earnings and expenditures.

As part of filing federal taxes, you’ll attach a Schedule C to Form 1040. This form can contain categories that can be tough to comprehend, but don’t worry! Instead, let’s look at some of these head-scratchers and consider our comprehensive guide for completing Schedule C for a step-by-step breakdown.

Schedule SE

Computing Your Self-Employment Tax. Calculating your self-employment tax is made easy with the help of a special form – the IRS’s own, Form 1040, Schedule SE.

Do you feel overwhelmed with tax forms and categorizing expenses? 

PriorTax can offer relief. Our Tax Professionals will do the work for you so that filing your tax return doesn’t have to add to the stress of owing self-employment taxes. Reach out to us and allow us to take care of everything from filing to preparing your returns.

How Truck Driver can File Taxes 2023

Posted by admin on March 16, 2023
Last modified: March 17, 2023

How to write off meals away from home when Truck drivers file taxes

Tax season can be stressful for truck drivers filing tax, especially when figuring out the best way to write off meals away from home. Here are two options that you should consider.

The actual expenses method for meals allows you to deduct up to 80% of the cost of each meal, with the 2021 and 2022 tax years providing an increased deduction rate of 100% for restaurant meals.

For self-employed individuals, typically only 50% of business meals can be deducted on taxes. However, transportation workers like truckers are eligible for more generous tax break regulations due to their obligations under federal hours-of-service limits. It is unnecessary to drive a certain number of consecutive hours before taking a meal break to receive the 80% deduction; being subject to the rules is enough for eligibility. To use the actual expenses method, an accurate record must be kept that tracks all costs related to each meal, including taxes and tips.

Truck Driver Tax

The per diem allowance for Commercial Truck Drivers

In addition to actual meal expenses, truckers may also opt for a standard per diem allowance. Again, 80% of this can be used as a tax write-off.

When deciding which rate to go with, there are two options available; one is slightly more generous than another.

When it comes to per diem allowances, travelers have two options. First, the general federal set of rates can be looked up on the General Services Administration website.

Additionally, those in the transportation industry have access to special per diem rates that simplify their journey as they no longer need to search for specific rates each time they make a stop.

Unfortunately, travelers cannot switch between these two options, thus requiring them to choose between either the general federal rate or the transportation rate.

Do you want to know the special transportation per diem rate for 2022?

When considering travel expenses in 2022, you may ask whether to use actual expenses or a per diem rate. Regarding transportation for full days on-site away from home, a per diem rate is available in the Continental US, which grants an allowance of $69 and tax write off amount of $55.20 per day. However, for partial days away working, it drops to 75% of that full-day rate with a corresponding 80% tax deduction write off – allowing for a daily allowance at $51.75 and tax write off amount per day at $41.40.

Rather than using the easier per diem method, you should focus on the one that saves you the most money. Therefore, it is advisable always to be mindful of how much you are spending on meals. With this in mind, you can easily compare your write-off amount with each method and determine which offers more cost savings.

Calculating these savings with some help may seem tedious and time-consuming. Fortunately, PriorTax simplifies the process by tracking all meal transactions for ease of comparison. This takes away the need to rely solely on convenience when opting for the per diem approach – allowing for more efficient decision-making based on accurate figures.

Can you use a per diem rate for anything other than meals?

Do you know that you are allowed to write off more than just meal expenses through per diem rates? It’s true – a so-called per diem for “incidental expenses” allows travelers to deduct $5 in travel-related service fees and tips. This fee is not restricted by the 80% cap imposed on meals, it stands at a flat rate of $5 per day.

It might seem insignificant, but this allowance allows individuals to pack their own food from home without needing to search for specific amounts on hotel invoices. In addition, the amount of paperwork involved with self-employment tax filing is already time-consuming; services like PriorTax and its Tax Professionals offer help sorting out the details.

On What Taxes can PriorTax Help Independent Truck Drivers with?

PriorTax can help independent truckers understand the taxes they are responsible for. There are typically three or four types of taxes truckers must pay: Federal income tax, state income tax (depending on where you live), self-employment taxes (Social Security and Medicare taxes), and/or International Fuel Tax Agreement, or “mileage” taxes. In addition, truckers usually need to make payments to the IRS on a quarterly basis, with deadlines falling on April 15th, June 15th, September 15th, and January 15th of the next year. To get an idea of how much in quarterly taxes may be owed, our free calculator is always available for your convenience.

Federal Income Tax for Commercial Truck Drivers

When it comes to paying your taxes, one of the most important things you need to know is the current rate for your bracket. Depending on how much you make annually, this could range from 10% all the way up to 37%.

State income tax for Commercial Truck Drivers

The individual’s residing location determines income tax. Certain states do not implement this type of taxation at all, while others offer two strategies: progressive and flat tax rates. The former levies a percentage of an individual’s annual income, ranging from 0-11%, whereas the latter imposes one fixed rate that applies to all inhabitants in the area.

Progressive tax: Rates based on your income level, with typical ranges from 0% to 11%
Flat tax: The same rate for everyone in the state

Self-Employment Tax for Commercial Truck Drivers

As an owner-operator, you are uniquely positioned to cover the full 15.3% obligation for FICA taxes (used to fund Medicare and Social Security). On the other hand, traditional employees only pay 7.65%, with their employers covering the remaining half. This is why it’s referred to as “the hardworking taxpayer’s tax”, or simply “the friendly ‘you have to do it all by yourself’ tax”.

Fortunately, when you file your taxes at the end of year, this amount will be accounted for in adjustments to your taxable income – ultimately lowering your income taxes! With PriorTax makes this process much easier and stress free. Our dedicated Tax Professionals will calculate these deductions for you from start to finish.

IFTA tax

The International Fuel Tax Agreement (or more commonly known as “IFTTA”) tax is a form of taxation applicable to individuals operating motor vehicles for the purpose of transporting cargo and/or people between different states or Canadian provinces. Specifically, those who drive trucks with three or more axles, two axles weighing at least 26,000 pounds, or with a trailer with a combined weight of more than 26,000 pounds must comply.

This tax on motor fuel applies to drivers who do any of the following:

Drive cargo (or people) between different states or Canadian provinces
Drive a commercial truck with three or more axles
Drive a commercial truck with two axles that weigh at least 26,000 pounds
Drive a commercial truck with a trailer, where their combined weight is over 26,000 pounds
How to pay your IFTA taxes

When filing your International Fuel Tax Agreement (IFTAs) taxes, many states make it easy for you by providing an online portal. Just do a quick Google search for “[state] file IFA taxes online,” and you can get started right away. To use this hassle-free method, you must gather the total miles traveled and gallons of gas purchased in each state – the portal will take care of the rest!

Those who cannot take advantage of the convenience of an online filing option in their state must take two additional steps to complete the process. Firstly, they must calculate the fuel mileage across all states that have been driven during the quarter. This can be easily done by dividing the total miles traveled in all states by the number of gallons purchased in each state-information which can be obtained from completing steps one and two. Secondly, they need to determine how many gallons were burned while traveling through each individual state in that same time frame; this is achieved by dividing the total miles driven through that particular place by their overall fuel mileage.

How IFTA taxes work for Commercial Truck Drivers

Since 1983, the International Fuel Tax Agreement (known as “TFA”) has allowed truckers to only pay fuel taxes in their home state. Before this, drivers were required to file separate returns and pay taxes in each jurisdiction where they operated. With TFA, all that hassle is gone!

Truck drivers who need to pay fuel taxes can benefit from the International Fuel Tax Agreement (EITA). This tax applies in all 48 states across the continental US, plus all 10 Canadian provinces. Luckily, drivers can write off EIRA payments as a business expense on their Schedule C – list it under box 23.

Conveniently, truckers have access to automated accounting software that helps manage the full range of responsibilities associated with independent driving. Not only will this software simplify your taxes, but it also has the potential to help you save money.