Tuesday, July 3, 2012
The Tax Man Cometh… Jim Bendickson
THE TAX MAN COMETH . . .
Most of our contractors have done a good job managing their federal and state taxes. But for those who have not, it’s a pretty sure bet the Internal Revenue Service (IRS) is looking for you now. During the past six months, we have seen a huge increase in the number of IRS tax levy requests on our operators. When the IRS attempts to attach your income, you know you’re in trouble. And if you haven’t already initiated a plan to get ‘caught up’, it’s definitely time to start. The IRS does not give up.
The good news: If you are behind, we’ve found the IRS is relatively easy to work with, so long as you are making an effort to get ‘clean’. The biggest problem occurs when an operator has simply not filed tax returns for several years. Because Sammons is required by law to report each operator’s annual gross earnings via Form 1099, the IRS expects to receive a tax return every year. When that doesn’t happen, they have no choice but to assume the full amount of the operator’s truck earnings is taxable. In situations where operators have not filed returns, we’ve seen tax levys in excess of $500,000! In reality, when a tax return has been filed, the actual taxable income is just a fraction of those 1099 earnings, and the final tax bill is reduced accordingly.
FOR THE NEW OPERATORS:
If you are new to trucking, find a tax preparer you trust and stick with them. Most operators use someone in their home town to manage their tax returns. This will cost you some money, but at the end of the day, you will save thousands of dollars in penalties and interest.
FILE YOUR TAX RETURNS every year. Your tax preparer will make sure you stay on track and meet all deposit and filing deadlines.
FOR THE OPERATORS WHO ARE BEHIND:
If you are aware a levy has been issued on you, deal with it immediately.
Seek help from a paid professional. Do not attempt to deal with the IRS on your own.
If you haven’t filed tax returns for one or more years, make a plan to get caught up. The sooner you do, the less it will cost you in the long run.
The old adage is true: In life there are only two things that are absolutely certain – death and TAXES. If you are unsure how to proceed in your situation, please visit with Sammons CFO, Jim Bendickson in Missoula.