Truckers Will Face More Tax Audits if Biden’s ‘Build Back Better Act’ Passes
Washington D.C. — More truckers are expected to face tax audits if President Biden’s “Build Back Better” social spending bill becomes law.
After months of infighting and political maneuvering, Democrats in the U.S. House of Representatives passed H.R. 5376 — also known as the Build Back Better Act (BBBA) — on Friday, November 19, in a party line vote of 220 – 213.
The controversial $1.75 trillion legislation includes $80 billion in new funding for the Internal Revenue Service (IRS) to hire some 87,000 additional agents and ramp up tax collection efforts.
This would result in an estimated 1.2 million additional audits each year with nearly half of the audits impacting families earning less than $75,000 per year.
Trucking tax expert, Michael Schneider, tells Transportation Nation Network (TNN) independent contractors will be among the first to face increased scrutiny from the IRS if the BBBA is enacted.
“Initially, it’s likely truckers get looked at more heavily because of their 1099 income,” he said.
Schneider, who serves as tax manager at ATBS, a company which provides business and tax solutions for trucking businesses, explained the new IRS agents may not be as familiar with laws impacting trucking operations.
“They are not fully trained and don’t understand the trucking industry,” he stated. “For instance, they don’t understand per diem.”
Another red flag for these “untrained agents,” according to Schneider, is when they see owner-operators report gross incomes of $200,000 or more but taxable incomes — after all lawfully applicable deductions are taken — are $75,000 or so.
Most of the expected new audits will be “letter audits” facilitated by mail rather than “field audits” in which agents come to your place of business.
If you are faced with a letter audit, Schneider said it’s important to remember a few helpful tips.
First, he says make sure you read the letter carefully and “only send the IRS what they are asking for.”
If you “lost your toll receipts,” for instance, Schneider advises not to disclose this kind of information unless you are specifically asked to do so.
Also, it’s important to “have a system in place to save receipts” and always be “vigilant about saving your electronic logging records.”
If you are a lease operator, Schneider urges to find out how long your carrier keeps the logs and how often those logs are available.
“If you can show a record of compliance, you are going to go through that audit pretty easily. They are not going to waste their time,” he commented.
You can always seek assistance for a trucking tax professional if you have questions or are unsure how to proceed.
As for the fate of the BBBA, it is now being hotly debated in the Senate.
Senate Majority Leader Chuck Schumer (D-NY) is vowing to pass the bill by Christmas.
Merry Christmas truckers!