A large share of the returns we prepare in Midland belong to people who work in the field: hands, drivers, operators, pushers, hot shot owners, and everyone who keeps a rig or a frac crew running. Their returns share a set of features that a standard office-job return does not have. This is the checklist we run through with them, and it is worth reading before your documents start arriving in January.
Count your W-2s before you file
Crews move between companies, companies get bought, and a year can produce three or four W-2s from employers you barely remember. Every one of them was also sent to the IRS. A return filed with one missing gets matched against the IRS copy and comes back as a notice with a bill months later. Make a list of every company that paid you during the year, and do not file until each one's W-2 is in hand or pulled from your IRS transcript.
Per diem and reimbursements
Per diem paid under an accountable plan, where the company pays a set daily amount for meals and lodging while you are away from home overnight, is generally not taxable and does not appear as wages. Per diem paid without those conditions, or paid on days you were not actually away, is wages and is taxed. Look at box 12 and box 14 of your W-2 and at your pay stubs; if you are not sure which kind you received, bring the stubs and we will sort it out.
Tools, boots and trucks: employee or contractor?
This is the question that decides whether your expenses matter on the return. Under current federal law, an employee paid on a W-2 generally cannot deduct unreimbursed work expenses. The steel toes, the FR clothing, the mileage to the yard: none of it reduces a W-2 worker's federal tax. A worker paid on a 1099, on the other hand, is running a business and deducts every ordinary and necessary expense of that business. If you are on a 1099, keep every receipt. If you are on a W-2, ask your employer about reimbursement instead, because the return will not help you.
- 1099 workers: truck expenses or standard mileage with a written log, tools, PPE, phone, insurance, licenses, and the self-employed health insurance deduction if you pay your own premiums.
- 1099 workers: quarterly estimated payments. Nothing was withheld from that income and the bill in April can be large.
- Hot shot and water haul owners: your DOT costs, permits, fuel and repairs are business expenses, and depreciation on the truck and trailer matters.
- Everyone: a year with income in both forms means two different sets of rules on one return.
Work across the state line
The Permian does not stop at the Texas border, and neither do crews. Texas has no state income tax, but New Mexico does. Wages earned for days worked in New Mexico can require a New Mexico nonresident return, and your employer may already be withholding New Mexico tax; check box 15 through 17 of the W-2. Days worked in other states with income tax follow the same logic. Bring anything that shows where you worked and when.
A layoff year is a different return. Severance is taxed as wages, unemployment is taxable and rarely has enough withheld, and cashing out a 401(k) early adds a penalty on top of the tax. If this was that year, come in before you file rather than after.
Frequently asked questions
My company paid me on a 1099 but I worked their schedule with their equipment. Is that right?
Maybe not. The IRS decides worker status by how much control the company has, not by what the paperwork says. There is a form to ask the IRS to determine it, and the answer changes who pays the employment taxes. Talk to us before filing.
I work two weeks on, two off. Can I file while I am out?
Yes. The client portal takes photos of your documents from anywhere with a signal, and we finish by phone.
Do I have to report the money I made hauling on the side?
Yes, whether or not anyone sent you a 1099. The good news is that side-hauling expenses are deductible against it, so keep the fuel and repair receipts.
Bring the stubs, not just the W-2
Pay stubs answer the per diem and state-withholding questions that a W-2 alone cannot. We are at 700 C Andrews Hwy in Midland, Monday through Friday, and we work in English and Spanish. Call (432) 257-7547.
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