Are you a new team truck driver who has no idea how to file taxes?
Hi, my name is Samantha, and I’m here to help you navigate this confusing time.
Whether this is your first year filing taxes as a team truck driver or you need a bit of a refresher from last year, this article will provide you with the tools you need. After all, we could all use a little bit of help with taxes (unless you’re an accountant).
Does anyone want to be audited by the IRS, or worse, get penalized for filing incorrectly (or not filing at all)? I think I speak for all of us when I let out a resounding, “No!”
To avoid encountering that problem, I’ve broken this article into two primary sections: one for company driver teams and one for independent contractor teams. Team drivers are paid a little differently than solo truck drivers, so doing taxes as a team driver differs slightly. You’ll learn how to navigate your unique tax situation as a team driver.
It’s up to you to take the information to use it and then to work with a tax professional for additional assistance.
Team Company Driver Taxes
Within a team of company drivers, each driver is considered an employee of the company. One doesn’t work for the other; they directly report to the company.
Because of that, taxes for team company drivers are a lot simpler.
Each driver gets their own settlement, so each driver will also receive a Form W-2 or an earning statement from their carrier. They’ll use this form to file their taxes, along with any other important paperwork required.
You’ll file taxes just like any other company driver. It’s the same as when another member of the company files taxes using the employer-provided W-2 form. Depending on the state you live in, you may need additional paperwork to file.
Team company drivers don’t need to worry about keeping every receipt for their expenses on the road to report on their taxes. Their company pays for those expenses (like fuel and maintenance costs). One driver won’t need to report earnings to the other driver, either, which also simplifies things when comparing it to filing taxes as a team of independent contractors.
Related: What truck drivers should know about filing taxes
Team Independent Contractor Taxes
As a team of independent contractors, the primary thing you need to determine is how you’ll get the tax forms you need to file your taxes. This is dependent upon how the team is set up and, subsequently, paid.
Typically, the lessee or truck owner takes on the full financial responsibility of the truck and is therefore the driver who gets paid by the trucking carrier. They’re responsible for paying their teammate. For the sake of this article, we’ll refer to the lessee or truck owner as the lead driver.
Sole Proprietorship
The lead driver can set up a sole proprietorship or a business. In some cases, a team might set up a partnership, but it’s not as common.
A sole proprietorship is a type of enterprise owned and operated by one person. The lead driver sets up the sole proprietorship and receives the settlements from the carrier. They’re responsible for paying the second driver and documenting their earnings.
Once the year ends, the lead driver is responsible for giving the second driver an IRS 1099 form or an earnings statement. An agreement should be made at the time of the team’s inception to dictate expectations about whether the second driver will receive an earnings statement or a 1099.
A 1099 documents the payments made to a driver as an independent contractor. A copy is sent to the second driver and to the IRS. The lead driver will get an earnings statement or an IRS 1099 form from the carrier to file taxes as the sole proprietor.
Business
The lead driver can also set up a business and sign with the trucking carrier that way. They’ll do this using an employment identification number (EIN). The business, not the drivers, makes the money and gets paid.
The money goes into a business account and the team comes to an agreement as to how much each driver will take home. The business pays the drivers and the business provides the proper tax forms depending upon the classification of the second driver. The lead driver will get a 1099 or a year-end summary from their carrier and they’ll use that to file taxes as a business.
The second driver may be classified as an employee of the business or an independent contractor. Depending upon their classification, they’ll receive either a W-2 or a 1099 (or an earnings statement). A discussion about how the second driver is classified should be completed during the team’s formation.
If the second driver is an employee of the business, they’ll file with a W-2. Because the second driver is an employee of the business, the lead driver is responsible for ensuring federal taxes, state taxes, Medicare and social security expenses are taken out of every settlement. The lead driver also needs to report this to the federal government.
If they’re an independent contractor, they’ll file with a 1099 or an earnings statement and they’ll need to keep track of their work expenses.
This is where it gets tricky. As an independent contractor, you need to keep track of your expenses on the road so you can use them for tax deductions. You might be wondering how you split up those expenses as a team.
Financial responsibilities should be indicated in the agreement teams make when they form. The agreement should dictate who’s responsible for truck payments, maintenance costs, fuel and more. The agreement may go a step further and dictate what percent of each expense category each driver owes.
For example, one team may choose to have one driver responsible for the entire truck payment while the other is responsible for fuel costs. Another team may choose to have each driver split every expense halfway. In that case, you’d need to keep receipts (or refer to a settlement summary) for the expenses you did cover so you can make the proper tax deductions.
Some teams may even choose to have the lead driver cover every expense. In that case, the second driver won’t be able to report deductions come tax time. That can be a hard place to be in. You could end up owing a lot of money in taxes because you can’t report any expenses to bring your income down.
As the second driver, you can request a copy of the year-end summary the lead driver receives from the carrier. Use this form to account for the deductions you’re allowed to take in accordance with the team’s business agreement.
If you have expenses outside of that, such as individual purchases for work tools on your personal card, keep those receipts.
Following Tax Best Practices
Being a team driver is a great venture and you can certainly run an efficient business as a team. You can also make more money. It’s just important to remember there are a few extra steps you need to take compared to a solo driver.
Before you start as a team, a written agreement should be formed and signed by both parties. If you’ve already formed a team, have open conversations about the agreement. If it’s no longer serving you or your partner, make adjustments.
There are major implications if you don’t file taxes correctly, whether you’re the lead driver or the second driver. And, as the lead driver, if you don’t pay the second driver properly, you can severely impact their financial standing.
W-2 forms and 1099 forms are reported to the IRS. They’ll find out if drivers are trying to get away with things or if they simply filed incorrectly. That’s why it’s crucial you’re on the same page with your team member. You wouldn’t want to be punished because you both tried to claim 100 percent of the business expenses. You also don’t want to be fined for trying to pay someone under the table.
Need Help With Taxes? Get the Help You Need
Isn’t tax season great? Gotta love it!
No? Okay, me neither. But unfortunately, it’s something that has to be taken care of. Every. Year.
The information above gave you a good place to start. You know what tax forms you need to file (a W-2 or a 1099 as a company driver or an independent contractor, respectively). You know who’s giving them to you (either the carrier or your teammate).
All that’s left to do is to start filing!If you’re unsure how to proceed or where to even start, I highly recommend reaching out to a certified public accountant (CPA) or tax professional. It can be overwhelming to do your taxes, and it can become increasingly difficult the more money you earn.
For more tips, find out what truck drivers should know about filing taxes.
You can also reach out to organizations that specifically help truck drivers with financial planning.