Ideally, you should file your tax return before April 18 or request an extension in order to file your returns accurately and avoid problems with the Internal Revenue Service (IRS). Audits are a risk that everyone should be aware of, but it is particularly true of independent workers, such as owner-operators.
According to data from the Transactional Records Access Clearinghouse at Syracuse University, the IRS will be reviewing self-employment tax returns by 5% more for the tax year 2021. This year, the audits may be triggered by the rise of a large number of new auditors employed by the IRS and are projected to be focused on the reviews of tax reports of freelancers and those with cryptocurrency activity, according to experts.
Here are the top pitfalls to avoid on last-minute tax returns:
Mismatches, Typographical Errors
It may seem obvious to most people, but to avoid an audit, you should file the correct tax return. The IRS receives payment information from employers, including 1099s and W-2s, and any discrepancies could raise a red flag and put you at risk of an audit.
Common mistakes that truckers often make include accidentally or on purpose raising operating expenses. Depending on the actual figures, this can arouse suspicion, even for low-income earners.
The IRS has a method of percentages for each category that you claim in the business section, called SCHEDULE C. As an IRS agent points out in his comment, “There cannot exist so much manipulation in the amounts of expenses to be claimed by a contractor independent or a small business because the IRS already possesses that information on the average amounts, based on the average expenses in the transportation industry, both locally and regionally.”
Therefore, IRS auditors are more likely to look for returns on the incomes of self-employed people.
For those with an independent income, the use of large amounts and rounded amounts on deductions could raise suspicions. Self-employed people should go expense by expense and not claim round amounts – for example, diesel $30,000, repairs $20,000, etc. This may prompt the auditor into thinking the taxpayer just put together a lot of numbers to report and did not correctly account for their expenses. There are many more mistakes that we make when doing our taxes and the best suggestion is to seek a tax professional with knowledge in transportation.