Sebastian's Tax Service,CA-Trucker Tax Preparation Sebastian Herrera,EA

🚛 **Trucker Tax Tips You Need to Know!** 💰

Owner Operates ! As you hit the open road, don’t forget about your tax responsibilities! Here are some essential tips to keep you on track this tax season:

1. **Track Your Mileage**: Keep a detailed log of your business miles. This is one of your biggest deductions!
2. **Deduct Your Expenses**: From fuel and repairs to meals and lodging, make sure to track all expenses related to your trucking business.
3. **Consider the Per Diem**: You might be eligible for a per diem deduction for meals while on the road, simplifying your meal expense tracking.
4. **Stay Organized**: Maintain records of receipts and invoices to make filing easier and to support your deductions if needed.
5. **Consult a Tax Professional**: Maximize your deductions and ensure compliance by working with someone who understands the trucking industry. find an Enrolled Agent who specializes in tax.

Stay informed, and keep those wheels turning! 🛣️💼

On this day, we remember the bravery of those who fought for our freedom.
Happy 4th of July!

Let's appreciate the liberties we enjoy and honor the sacrifices made.

Have a safe and memorable Independence Day! 🇺🇸✨

Certain factors can increase your chances of being selected for an audit. These include:
- Filing a return with errors
- Filing a return that is missing information
- Reporting income that is significantly lower than previous years
- Filing a return that is out of the norm

If you are selected for an audit, the IRS will contact you via U.S. mail to schedule an appointment.

At the appointment, the assigned agent will review your tax records and ask you questions about your return. It is important to be prepared for an audit and to have all of your records in order.

If you are prepared and cooperate with the IRS, an audit can go smoothly.

Contact our office today to learn more:
https://www.sebastianstaxservice.com/contact.php

Sustainability is the core of logistic operation and a vision of effciency working as a logistics director for a major bottle company for tweety four plus year.
Now a small business owner as a federally licensed Enrolled Agrent seventeen years. Helping start-up, small and large trucking companies thrive.

Understanding small business taxation is an important part of running a successful business. As a small business owner, it’s important to be aware of the common tax myths and misconceptions that exist so that you can be confident in the decisions you make.

Tax Myth #5: I Don’t Need to File a Tax Return if I Don’t Owe Any Tax Due

One of the most common small business tax myths is that you don’t need to file a tax return if you don’t owe tax due. This simply isn’t the case. Even if you don’t owe tax on your income, you still need to file a return. Failure to file a tax return can result in steep penalties and interest, as well as potentially jeopardizing your future tax returns.

It’s important to make sure that you are filing your tax returns each year timely, even if you don’t owe tax. Filing an accurate and timely tax return can help you avoid unnecessary fines and penalties and ensure that you qualify for all of the tax benefits you’re eligible for.

Tax Myth #4: My Home Office Isn’t a Tax Deduction

You may not realize that your home office may be eligible for tax deduction. While the deduction for home in office expenses has become increasingly difficult to qualify for, it’s still possible. In order to qualify for the deduction, you must meet certain criteria. This includes having a designated area of your home used exclusively for business and having the ability to demonstrate that the use of the space is necessary for the business.

If you do qualify, a home in office deduction allows you to deduct certain expenses such as rent, mortgage interest, and certain repairs, which can result in significant tax savings. It’s important to consult a tax professional to make sure that you’re meeting all of the requirements and eligible for the deduction.

Tax Myth #3: I Don’t Need to Keep Track of My Business Receipts

Many small business owners assume that they don’t need to keep track of their business receipts. This, however, isn’t the case. It’s important to keep track of all business receipts in order to accurately document business expenses and ensure compliance with tax laws.

In addition to being important for tax purposes, keeping track of your business receipts also helps you stay organized and allows you to more accurately track the financial health of your business. Having accurate records of your business expenses can help you better identify areas of your business where you can save money.
This allows you to be more aware of where your money is being spent and how it’s being utilized in your business.

Tax Myth #2: All of My Business Expenses Are Tax-Deductible

Many new business owners assume that all of their business expenses are tax-deductible. This, however, isn’t the case. While certain business expenses may be eligible for deduction, they must meet certain criteria before they are considered tax-deductible. For example, business expenses must be ordinary and necessary and the cost of the expense must be reasonable. Additionally, the expense must be directly related to the business or trade in order for it to be considered tax deductible.

To maximize the amount of deductions you can take, it’s important to keep accurate records of all of your business expenses.

This means keeping track of all receipts, invoices, and any other documentation related to your expenses. This will not only help you document the expenses for tax purposes but can also help you stay organized and keep track of how your business is doing financially.

Tax Myth #1: I Don’t Need to Worry About Tax Obligation Until My Business Is Profitable ?
Many small business owners mistakenly believe that they don’t have to worry about tax responsibility until their business is profitable. This simply isn’t true. All businesses must file and pay taxes whether they are profitable or not. As a business owner, you must file all of your required tax forms and pay your tax timely, regardless of whether your business is profitable or not, and please don't listen to third party non- tax professionals. Thats the worst advise.

If you're currently operating as a sole proprietor, Llc or partnership, consider incorporating your business as a corporation.
These business structures offer several tax advantages, including the ability to reduce self-employment taxes and access to deductions that aren't available to sole proprietors, Llc or partnerships.

An Owner-Operator’s Guide to Tax Deductions

Managing your taxes is one of the biggest challenges of operating an owner-operator trucking business. To succeed, you need to understand how to calculate and pay taxes to state and federal authorities and minimize your tax liability by claiming expense.

Being aware of owner-operator expense, combined with good planning and recordkeeping throughout the year, helps you avoid unexpected surprises during tax season.

In this guide, I’ll cover estimated tax payments, claiming deductions, and tracking business expenses as a self-employed owner-operator.

Types of Taxes for Owner-Operators

Owner-operators are subject to these types of tax:

Self-employment taxes
Federal Schedule-C including an LLC is a schedule-C by default and fully at risk subject to self-employment tax “WHY” would you be an LLC subject to this taxation. Owner-operators are responsible for paying Social Security and Medicare taxes directly to the IRS, rather than having these deducted from your paycheck if you’re employed as a company driver. The estimated self-employment tax rate is 15.3% (12.4% for Social Security and 2.9% for Medicare).

Self-employment tax is “NOT” a sliding scale, you will always be taxed at 15.3% no matter what net tax is.

Federal and state tax
In addition to self-employment tax, owner-operators are responsible for estimating and paying federal and state income tax.

Typical expense for owner-operators
Common expense for owner-operators include:

>Sleeper U.S. per-diem: All 50 States incl, Canada are per-diem qualified.
>Interest paid on business loans
>Depreciable Asset- Can’t take payments and deprecate. Either or.
>Insurance premiums
>Retirement plan contributions-Only if you are on payroll
>Startup cost-Amortized 15 years
>Supplies
>Permits and license fees
>DOT physical exam costs
>Lodging- Can’t take both per-diem and lodging under ELD’s (That Night)
>Truck lease
>Accounting services
>Communication equipment
>Truck repairs and accessories
>Commissions

How to Document Your Deductible Business Expenses

To claim owner-operator expense, you need good records. Without documentation, you could be at risk for an audit.

Follow these tips, and you’ll have what you need to claim operating expense:

1. Do not use cash, use a credit, or debit card, remember the expense needs to be reasonable and necessary. create digital copies, do not taking picture of receipts and storing images in a folder. Keep the physical receipts, too, as a backup. Use bank ledger as expense, the IRS uses this very method when an examination is taking place.
2. Don’t forget to collect receipts for lumber fees or other business expenses charged to your credit card. This includes tolls, weigh station fees, and any essential technology for running your business. Many owner-operators have two credit cards — one for business and another for personal use — to track their spending better.
3. Keep all records that support every deduction you claim on your tax return, beginning with your ELD logs. You’ll need those for your per diem deductions, which we’ll explain in the next section.
4. Leverage technology for accurate recordkeeping. You may be able to link your fuel card app to your accounting software or use business management platforms with real-time expense tracking. These records can then be easily accessed at tax time.

Per Diem Business Expenses

Per diem (per day) expenses id subject to D.O.T. hours of services subject to 80%, the IRS allows you to spend on meals, beverages, and tips while you’re away from home for work, however you need to be under your D.O.T. logbook (ELD’S) The maximum allowable per diem full-day rate for the 2024 tax year “varies”..

Owner-operators deduct per diem expenses on IRS Schedule C, which reduces self-employment business taxes and income taxes owed on the return. Over-the-road owner-operators away from home much of the year can maximize savings using the per diem allowance.

Even if you use the per diem allowance, keeping all receipts and travel documentation for at least “TEN” years is good practice. It’s also important to realize that you “CAN’T” deduct your total per diem from your tax liability, dollar-for-dollar.

How to claim a depreciable asset
Section 179 of the Internal Revenue Code allows taxpayers to deduct certain property as an expense if they place it in service. This applies to your truck lease in lieu of owning the asset.

“Straight-line” depreciation is the standard depreciation schedule for a new Class 8 truck. The IRS spreads this deduction evenly over several tax years.

You should also consider a variation of the multi-year formula known as accelerated depreciation, which takes a percentage of the equipment’s value in a couple of years and then a lesser rate afterward.

Truck owners and leasers may be able to deduct other vehicle costs, such as:

>Fuel expenses
>Insurance
>Licenses
>Maintenance

How to minimize your tax
Here are some tips to reduce your tax:

1. Get help from a tax professional (Enrolled Agent) specializing in owner-operator tax. These services typically save you more money in deductions and other tax loopholes than you pay for their expertise.
2. Payroll saves money tax-free by regularly contributing to an IRA, SEP, or 401(k). A portion of your contributions are tax-exempt until you start drawing on them many years later.
3. Track personal vehicle miles. Commuting to and from work isn’t an allowable business expense. However, you can deduct the mileage if you drive for work-related errands such as going to the bank, meetings, or truck shows.
4. You can receive tax credits for paying tuition — for yourself or your children — at qualified educational institutions. If applicable

What to know about IRS audits
Claiming significant expenses uncommon for a single-tractor owner-operator may raise red flags and trigger an IRS audit. Typically, the IRS has up to three years to request an examination for any deduction or taxable income reported on your tax return. It’s advisable to retain your records for at least that duration in case needed.

If the IRS examines your return, that doesn’t mean your Enrolled Agent made a mistake. The IRS randomly selects some returns to determine compliance with tax rules. Most exams of self-employed involves verifying expenses. Contact the person who prepared your return if you received a notice of deficiency.

Make truck driver tax deductions work for you

Taxes don’t have to be a struggle for owner-operators. The key to success is maintaining good records and accounting for owner-operator expense all year. You might also consider hiring a tax professional to ensure you get the maximum allowable truck driver tax deductions — but don’t wait until tax season! Find a tax pro well before it’s time to file taxes.
If you want to save time and lower your tax liability, automate the processes within your business with SEBASTIANS TAX SERVICE INC, the way to streamline and optimize your business while saving you time.

Sebastian Herrera EA

Another important tip for successful business tax planning is to stay up-to-date on the latest tax changes. This can be a difficult task, as the tax code is constantly changing. However, there are a few resources that can help you stay informed.
First, you can check the IRS website for information on the latest tax law changes. You can also sign up for email or RSS feeds from the IRS to get updates as they happen. Finally, you can consult with a tax advisor to get the most up-to-date information.

How the NAR Settlement Will Change the Way You Buy a Home
What you need to know as a consumer!

A few months ago, an anti-trust lawsuit against the National Association of Realtors (NAR) was settled for 419 million dollars. News reports announced this would slash commissions by 25% to 50%. How would that happen?

First, a quick look at how selling and buying through an NAR realtor has worked. A seller offered a commission (6% being standard) from which both their broker and the buyer’s broker were paid, with the typical offer to the buyer’s agent at 2.5% to 3.0%. That information was displayed on the listing so buyers’ brokers would know what they would receive. The plaintiffs argued that sellers who offered a low amount to the buyer’s broker disincentivized the agent to show their property, so sellers would want to offer “the going rate” that buyer’s agents expected to be competitive.

Going forward, NAR will not allow sellers to advertise how much they will offer the buyer’s agent. The idea is that buyers’ agents are not going to agree to what will essentially become a raffle to see what they will be paid when they sell a specific property. Instead, the agent will sign an agreement to work for the buyer for a set fee or percentage of the sales price that will come directly from the buyer’s pocket. The seller will most likely continue to pay 2.5 to 3.0% to their agent. Basically, the court is seeking to move the burden of paying the buyer’s broker from the seller to the buyer.
Is that good news for sellers? Maybe.

The problem is that most buyers don’t have funds to pay their broker out of pocket. Current lending practices don’t allow buyers’ brokerage fees to be added to the cost of the home. They need to be included in the price of the house so they can be paid out of the proceeds of the mortgage loan.

The settlement hopes this change will force buyers’ brokers to work for less. As with so many well-intended regulations, there will be unintended consequences. Faced with the prospect of doing the same work for a 25% to 75% pay cut, how many buyers’ brokers will even stick around to show the homes of sellers who list with a realtor?

Another important point: this only applies to real estate agents who are members of the NAR. Agents who are not members can advertise what the seller is offering buyers’ brokers. This gives a competitive edge to properties listed with non-NAR agents.

In the past, brokers who were not NAR members could not list their properties on the NAR-owned Multiple Listing Service, which is to real property what the New York Stock Exchange is to stocks. It provides an efficient marketplace in which to buy and sell property and is a significant advantage of NAR membership.

That is no longer the case. Another little reported requirement of the settlement is that NAR can no longer exclude non-members from using the MLS. Does that mean a non-member can put a listing on the MLS that advertises what the seller will pay a buyer’s broker? Right now, I don’t know.

A lot of real estate agents will be cancelling their NAR memberships. In part that will probably be a reaction to the higher membership costs that will be needed to pay off the $419 million settlement. As one realtor put it, “This probably means the end of NAR as we knew it.”

My practice has a considerable amount of brokers, the inundation of emails as well as potential new home ownership has been large regarding this new change, It will be very interesting how congress imposes new tax law based on those new changes.

If NAR dissolves, its robust education, ethics requirements, and the MLS platform will disappear as well. The process of buying and selling property could be set back by 50 years.

Are You Prepared for Sunsetting Estate Tax Exemptions?

Record-high estate tax exemptions are scheduled to sunset in 2025. Planning in advance is key to taking advantage of opportunities — and avoiding donor remorse.

The High Cost of Rushed Planning

Current estate tax exemption rates are the highest they have been in history, allowing individuals an unprecedented $13.61 and married couples $27.22 million to give away during life or death tax free. The temporary exemption, however, is scheduled to sunset on December 31, 2025 — at which point, barring action by Congress, it will revert to approximately $7 million per individual, adjusted for inflation.
Current exclusion levels represent a significant opportunity. In similarly fluctuating tax environments, however, we have observed some families acting precipitously as deadlines approached. In our report, we discuss action items for optimizing your plan across tax environments as well as examples of potential planning missteps, including:

>Completing a gift to an irrevocable trust with liquid, rather than harder-to-value, assets due to time pressures, resulting in insufficient liquidity later in life
>Gifting company stock to trust that later saw unexpected, spectacular growth — without modeling alternative tools that would have ensured access to the funds
>Gifting retirement assets to trust without a complete understanding of the structure, resulting in more restricted access and control than anticipated

Start Now

Lifetime gifting has numerous advantages. But modeling the universe of strategies for an array of potential tax environments takes considerable time, coordination and decision-making.
In this report, we discuss strategies and action items for optimizing your plan, including how Sebastian's Tax Service Goals Driven process can help you model how tax changes and potential gifting will impact your goals, liquidity and complete tax picture, both during your lifetime and for your beneficiaries.

The IRS conducts three types of audits: field audit,office audits,correspondence audit.
Field audit, an IRS agent will visit your home or place of business to go through your records.
This is the more comprehensive type of audit and can last anywhere from a few hours to several days, depending on the complexity of the audit.
Office audit, the IRS will provide you with a list of documents they would like you to submit.
You will be asked to bring your records in person, always give them copies.After the IRS has reviewed your documents, they will contact you with any additional questions.
correspondence audit, also known as a Campus Examination.While IRS correspondence audits are the most basic type, they resolve fewer technical tax issues with individuals and organizations. This IRS audit type is typical for non-profit and philanthropic companies with simple matters involving small amounts.
As the name implies, the Internal Revenue Service conducts correspondence audits via mail.

Call us we can help.

Tax planning is an essential aspect of financial management for both individuals and businesses.
It is the process of arranging your finances in a manner that reduces your tax liabilities and maximizes your after-tax income or profits.
Proper tax planning can help you avoid unnecessary tax expenses and ensure that you comply with all tax regulations.
Contact us to speak to our Enrolled Agents

TRUCKERS NOW SUBJECT TO ABC WORKER
CLASSIFICATION (TEST) AUGUST 30,2022

A federal district court has formally lifted the injunction blocking California’s enforcement of AB 5’s ABC test against motor carriers and independent truck owner-operators conducting business in the state. This means AB 5 will go into effect immediately for these transportation workers. Application of the ABC test under AB 5 will mean reclassifying drivers as employees in most cases.
The injunction had remained in place while the California Trucking Association (CTA) waited to see whether its case would be heard by the U.S. Supreme Court. But in June, the U.S. Supreme Court denied the petition to review California Trucking Association v. Bonta. ((April 28, 2021) U.S. Court of Appeal, Ninth Circuit, Case No. 3:18-cv-02458)
Although the CTA’s legal challenge will continue to be heard, truckers are now subject to AB 5 while the case proceeds.
Of concern for the trucking industry is the B prong of the ABC test, which defines an independent contractor as a worker who “performs work that is outside the usual course of the hiring entity’s business.” A trucking company hiring an independent owner-operator would presumably fail the B prong of the ABC test; all prongs must be met for the worker to be an independent contractor.
However, truckers should evaluate if they may qualify for the business-to-business contracting exemption from the ABC test.

The mileage rate is going up for the second half of 2022.
Starting TODAY (July 1st) through the end of the year, the standard mileage rate for business travel is now 62.5 cents per mile.
(That's a 4 cents per mile increase from the January 1 - June 30.)

We know that miles and pay are just part of the equation. Our goal is to give Owner Operators and W-2 drivers the balance of the best Trucker Tax preparation in the industry! From an expert that was in the industry for 24 years!

Call us!

So, why exactly should you amend your federal tax return?
1. INCOME: Late arrival/corrected W-2s and 1099s or unreported income are important reasons to file an amended return. You want what you filed to match the IRS's records.
2. FILING STATUS: Single, Married Filing Jointly, Married Filing Separately, Head of Household -- Depending on your circumstances, a different filing status may help your tax situation and be a good reason to file an amended return.
3. MISSED DEDUCTIONS: Incorrectly claim certain expenses? or inexperienced prepare based on "NO" knowledge of business and trade (this would be the common reason) Forget to claim them? Accidentally include or leave out a dependent? The same goes for missed tax credits (and there are a lot of them right now).
4. CHANGES IN TAX LAW: The ever-busy IRS sometimes clarifies a rule or a court ruling down the road – possibly creating a tax break for you. Check with us on this one anytime.

Customer/Client relationships are the key to a thriving business – customers are at the heart of whatever it is you provide.
And the relationship needs to be MANAGED, and at scale … otherwise, you’re merely a glorified freelancer.
And just like accounting transactions and payroll taxes can be automated, so can various aspects of customer interaction.
So, it might be time to implement a good CRM (customer relationship management) software.
We've got some thoughts, and we're happy to share them.

There’s never a better time than now to start a deep dive into the financial practices of your business.

Of course, the first place you always want to start is by cleaning up your books.

Then move on to cleaning up your systems -- shift to a new system if you've outgrown your old one.

Advancements in cloud-based accounting and disruptions in supply chains demand adaptation if your business is going to keep thriving in this economy.

After an influx of cash (like a big tax refund), the smart cookie starts thinking about reducing their debts such as high-interest credit cards.
Think about it: You pay a lot for this credit and the balances on your high-interest accounts build up fast making the stuff you buy more expensive.
Chip away at this debt first, and you’ll do your wallet and your credit score a BIG favor.

Tax planning is for those who want to get ahead of the game and not simply "play defense" during the tax filing season.
We take a look at what your projected return would be,advise on key things to do before year-end to abide by Revenue code ... to your advantage.
Contact us if you're interested in playing offense this year.

We made it to Tax Day. Whew! Make sure and grab up some of these freebies and discounts that are valid today.
As for us, we're still busy at it. (And now accepting encouraging words, happy thoughts, hot coffee, yummy treats, and high fives.) 😉

Tax Day 2022 Freebies, Discounts and Deals to Ease the Stress and Burden of Your Tax Filing Deadline You know what they say about life‘s only guarantees being death and taxes, but gosh, isn’t that grim? Lighten up and add some levity to your tax filing deadline with these Tax Day freebies, discounts and deals to save some more of your hard-earned money (while also treating yourself). Here are t...

Did you know you can make 2021 IRA contributions all the way up until the tax deadline? If you can, you should. It means better deductions on your tax return.
Note:
- Most taxpayers can generally contribute up to $6,000 to their IRAs for 2021.
- 50 years of age or older at the end of 2021? The limit increases to $7,000.
- There is no longer a maximum age for making IRA contributions.

Your dreams of being the boss aside, your business isn’t going to last long if you don’t handle your money right. If your business is a partnership, you have special considerations – such as how your business is structured and (much, much more importantly) how everybody gets paid.
It’s key to set up your company so everyone knows how the money flows.