The trucking industry is continually growing and is among the most profitable nowadays. As you benefit from the profits in this sector, you should ensure you uphold the law. One of the rules that affect your trucking business is taxation.
Tax services for truckers have various unique characteristics and are best left to experts to handle. There are different tax accounting methods the professionals will use to compute your tax bill. Here are the primary ones that will apply to your trucking business.
Cash Receipts Method
In this method, only your earnings from the current tax year are gross income. Though easy to use, the cash receipt method is only ideal for small trucking companies and sole proprietorships.
If for instance, you get an advance payment in December for January services, you will include this payment in your prevailing tax year though it is income for the subsequent one.
This method uses concepts opposite to the cash income one. You should include all your income for the tax year as your gross whether you have received it or not.
If, for instance, you have already delivered goods to a customer, but they have not paid up yet, the expected payment is still part of your taxable income.
This has features of both the accrual and cash receipts tax accounting methods. The IRS, however, has various restrictions on the inventory, expense and income that can use hybrid accounting. If you opt for this accounting method, you are required to use it consistently for your returns to pass IRS scrutiny.
Getting the ideal method from the above to use for your tax accounting is virtually impossible as a trucker with no finance background.
The accounting firm you select is best placed to scrutinize your finances and advise you on the best. This ensures you comply with set IRS regulations and benefit from the deductions available for the trucking sector.