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If you are a fleet manager or a truck driver then you have to calculate your IFTA tax by yourself. This can be very difficult and time-consuming work for you. It doesn’t matter how many times you had filed taxes earlier, there are some easy steps you can follow to do this IFTA tax calculations easily.Read More
Step 1: Record your IFTA mileage
This is the most difficult and time consuming step of the IFTA calculations. There are three steps to calculate your mileage.
- Manual: This method requires you to have pen, paper and calculator ready in your hand.
You have to note down a lot of numbers and do a lot of calculations. Every time you enter a state, you have to note down the odometer reading and also when you exit the state, you have to record the reading again. This will give you the number of miles you drove in a state.
Miles driven in a state = odometer reading after exiting the state – odometer reading at the entry point.
Once you have the total number of miles driven in each state for the quarter, then you can add all them together to get the total number of miles driven in a quarter.
- By trip calculator: If you don’t want to note down your odometer reading every time you enter a state, then you can use a trip calculator tool to estimate your miles or use ifta state mileage calculator. In this method, you have to enter your starting point and end point of the journey. Then the trip calculator estimates your miles for you. Now you have the data for one state, similarly you can collect the miles travelled in all the states. Therefore by adding all the miles driven in the quarter will give you the total miles for the quarter.
- By IFTA automation software: With the help of IFTA automation software, you can record your miles driven in a particular state automatically. Therefore it is the easiest method of them all. It can give you the total number of miles driven in each state and the total miles for the quarter with a click of a button.
The manual and the trip calculator methods are very time consuming and there is a great risk of human error involved with them. Compared to them, IFTA program can do all the calculations in a few minutes with great accuracy. If you operate a large fleet, you simply cannot use the first two methods as they are not a viable option. For a large fleet, you can calculate all the data in a couple of minutes with the help of an automation tool.
Step 2: Fuel purchase receipt
To calculate the fuel tax, you just need to add the number of gallons of fuel you purchased a particular state. Therefore, it is very necessary to maintain each and every fuel receipt. It is also very important to include all the state traveled even though you didn’t buy any fuel from any particular state because the fuel tax still is calculated for that state.
First you have to calculate the fuel mileage by simply dividing the total number of miles driven by the total gallons of fuel purchased.
Fuel mileage = total miles / total gallons of fuel
Once you have the fuel mileage, now you can find the amount of fuel used in any particular state.
Fuel used in the state = total miles driven the state/fuel mileage
Now, you can calculate the total IFTA tax for each state. To calculate the IFTA tax for any state, first, you need to know the tax rate for that state. Then you can multiply the tax rate by the number of miles driven in that state.
Fuel tax for the state = tax rate of the state multiply by fuel used in that state
“There is more credit and satisfaction in being a first-rate truck driver than a tenth-rate executive.”-B.C. Forbes
Step 3: Total fuel tax owed to the states
In the second step, you can find out the fuel tax for each state, hence you are able to find out the amount of tax you owe to each state.
The amount of fuel tax owed to each state is equal to the fuel tax required for the state minus the fuel tax you already paid to the state.
This number can be negative, which simply means that you have paid more tax to the state than you actually burn the fuel in the state.
Now you can find the total tax owed to all the states by adding the individual tax owed to each state including the negative values.
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Step 4: File your tax return
This is the final step of the process. Each state has some type of online portal to file your taxes. Since you have all the information you need to file your IFTA tax, you can simply use the online portal or you can file it by paper.
You have to file your IFTA tax quarterly. If you follow all these steps to record your IFTA tax, you will find it easy to calculate and file your IFTA tax.
The recording of all the financial transactions including sales, receipts, purchases and all other types of payments is called bookkeeping. Bookkeeping is the other name of performing accounting operations of a business. For truck drivers, bookkeeping is one of the most important parts of their job profile. Most of them really don’t like to do this kind of paperwork, but it is the most essential part of the work for them. Regular and proper bookkeeping can save a trucker some nice chunk of money in taxes. Therefore, a trucker needs to be very careful and organized so as to collect and manage each and every receipt. Here are some basic tips of bookkeeping for the driver that can help him be a successful trucker.
Open a Separate Account for Business
This is the first and most important part of bookkeeping. By opening a separate checking account, you can make your life so easy. You are able to deposit all your payments here and also pay all the expenses from this account simultaenously. This helps a trucker maintain a separate record for all the transactions related to the business. This will also help at the end of every quarter, when you need to make the tax payments. You don’t need to go through multiple accounts to search any transaction in the time of audit as you can retrieve every piece of information from here.
Maintain Separate Credit Card for Business
Always maintain a separate credit card for your business. Just go for the one which has zero to minimum annual fees and a nice reward program. By maintaining a separate credit card, you can simply maintain all the payment history and use it whenever required. Make sure you pay the full amount at the end of the month to make the most of the reward program. Almost all credit cards categorize the expenses like gasoline, fuel, food and truck maintenance etc. This is another way to keep all your records.
Save All Receipts and Maintain Daily Records
You have to save every single receipt no matter how small the amount is. Transportation accounting software will help you save a lot at the time of paying your taxes. Maintain a box in your truck just for keeping receipts or in case of e-receipts, maintain a separate folder in your computer or laptop. This will help you in your monthly statement and quarterly estimation of taxes. Most of the time a scanned receipt can also work fine, but keep the originals as well for your record.
Maintaining daily records provide you a very clear picture of your business in terms of profit or loss. Once you start doing this regularly, you will see it is not hard to keep your records organized.
“Accounting does not make corporate earnings or balance sheets more volatile. Accounting just increases the transparency of volatility in earnings.”
Maintain Travel Log and Save All Your Logbooks
You have to maintain a travel log for each of the trips made, so that you don’t miss out on any of the expenses that occur during the trip. You can use electronic log records or your handwritten logbook for this purpose. If you are using an electronic logging device, make sure you have access to the history of the device. This will come very handy when you are doing your taxes and helps you save a lot of time, effort and money.
Handle Your Checks Carefully
This is very important that you pay special attention while dealing with your business checks. Because they are as good as cash, they can be easily misused. Always keep track of your checks and keep verifying with your bank from time to time. This will help you save yourself from any frauds.
Always Maintain a Handbook
There are many small expenses that occur during your trip where it is not possible to get the receipt. This handbook becomes really important in those scenarios. Suppose you go for a car wash or grab a snack, such kinds of expenses can also be deducted from your taxes. To keep a record of all these little expenses, you have to have a notebook in your truck all the time. Sometimes you have to use your personal vehicle for business purposes, then you can note down the mileage used for business purposes. You must make sure to write down the date, time, location, the amount you spend and for what purpose. That will be very helpful to you while filing your tax return.
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In addition to all these steps, you must save all your records, receipts and every single detail about the expenses that occured during your tax period. It is mandatory to save the records of the previous three years from your tax return filing date. You also have to save all the records of profit and loss, your bank statement, your quarterly tax payment, your truck documents and truck’s insurance.
There are a lot of accountants and trucking company accounting service providers that can do this for you, but if you don’t want to use the help of a professional, you can easily do it by yourself. Just purchase a few plastic folders and maintain all the receipts date wise. At the end of every month just staple them all together. In this way, they stay organized and you are able to send the scanned copies to your tax guy after a quarter’s end. Most of the time you don’t need the physical copies of your receipts, but it is advisable to save them for a few years. There are also various user-friendly software programs available in the market which can make things easier for you.