Company Driver to IC

Truemac · Mar 15, 2019

Read this thread from page 1. Wanted to say thanks for sharing your experience, the good and the bad. I'm a company driver out of the Markham terminal and I've been heavily considering aiming for IC status in a couple years. Taking notes on how to set myself up for success. I hope things have picked up for you since moving into your new rig.

johnnyboggs · Mar 3, 2020

ncdriver1 said: ↑

That doesn't include all repairs or my payroll.
I'm setup as an S-Corp (thats the pass-through business getting tax breaks!) and pay myself 800/week after taxes. My payroll company deducts all the taxes, around $300 a week and I get a W2/W4 or whatever form it is at the end of the year. Interesting to note, if for some reason I fire myself I can collect unemployment...

So of that $110: $55k will be payroll (wages+taxes including payroll tax) and $55k minus all my other business expenses will be profit to me (the business owner). I had a 10k repair in January but nothing major since then, so lets say 35k net operating profit after tax.
Net-net should be in the 70's to maybe 80

And, yes I spent all day today looking at a truck and speccing one out. Going to pull the trigger in January/Feb once I get my taxes done. Should spec out around $165-170 and I plan to finance around $120 to keep my payments reasonable.

Forced Layover and Demurge. Also Holiday/Sunday pay but it seems random.
Click to expand...

So how do you get your hands on that profit? Do you cut yourself a bonus check at the end of the year? Do you roll it over? And when you collect it do you have to pay all the payroll taxes on it? When I finally get this going I plan on starting an S Corp. myself and pay myself a salary exactly the way you’re doing it. I’ve been wondering how to handle the profit.

johnnyboggs · Mar 3, 2020

Lilj said: ↑

No,you do not get extra pay 4 driving on sunday!!!
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I do. Company gives me $125 over my regular pay.

ncdriver1 · Mar 3, 2020

johnnyboggs said: ↑

So how do you get your hands on that profit? Do you cut yourself a bonus check at the end of the year? Do you roll it over? And when you collect it do you have to pay all the payroll taxes on it?
Click to expand...

Basically you make a draw as an owner whenever. Taxes are different from regular payroll, but my accountant handles that. You don't pay payroll taxes, but it does count as income and is taxed as such. So if I pay myself a salary of $1000/week for 52 weeks and then an extra $2500 per quarter as an owner, my taxable income would be $62,000 for the year before deductions. Only the $1000/week would be subject to payroll tax.

johnnyboggs · Mar 3, 2020

ncdriver1 said: ↑

Basically you make a draw as an owner whenever. Taxes are different from regular payroll, but my accountant handles that. You don't pay payroll taxes, but it does count as income and is taxed as such. So if I pay myself a salary of $1000/week for 52 weeks and then an extra $2500 per quarter as an owner, my taxable income would be $62,000 for the year before deductions. Only the $1000/week would be subject to payroll tax.
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First of all, thank you for taking the time to explain this. It’s something that I’ve been wondering about for a while. so I guess what I’m not grasping is what’s the difference between “payroll” and”taxable income”? Seems like it would be the same thing. And what’s the difference in the tax rate between the two?

ncdriver1 · Mar 3, 2020

johnnyboggs said: ↑

what’s the difference between “payroll” and”taxable income”? Seems like it would be the same thing. And what’s the difference in the tax rate between the two?
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Payroll taxes are the employer side of income tax to put it simply (SS, Medicare, Unemployment). So for $1000 weekly salary I would as the employer actually pay around $1200, the 200 difference goes to state/fed govt. As the employee I see $1000/week minus my regular income tax deductions.
As the business owner when I take a draw there is no employer side of taxes to pay, so if I drew an extra $1000 per week as an owner I would save that $200 and only owe regular income tax ($1000 salary + $1000 business income as owner).

johnnyboggs · Mar 3, 2020

ncdriver1 said: ↑

Basically you make a draw as an owner whenever. Taxes are different from regular payroll, but my accountant handles that. You don't pay payroll taxes, but it does count as income and is taxed as such. So if I pay myself a salary of $1000/week for 52 weeks and then an extra $2500 per quarter as an owner, my taxable income would be $62,000 for the year before deductions. Only the $1000/week would be subject to payroll tax.
Click to expand...

I just googled it and i think i understand it now. If an owner takes a draw, he only pays income tax on that money. He doesn’t pay the medicaid and SSI. Is that right?

johnnyboggs · Mar 3, 2020

ncdriver1 said: ↑

Payroll taxes are the employer side of income tax to put it simply (SS, Medicare, Unemployment). So for $1000 weekly salary I would as the employer actually pay around $1200, the 200 difference goes to state/fed govt. As the employee I see $1000/week minus my regular income tax deductions.
As the business owner when I take a draw there is no employer side of taxes to pay, so if I drew an extra $1000 per week as an owner I would save that $200 and only owe regular income tax ($1000 salary + $1000 business income as owner

ncdriver1 said: ↑

Payroll taxes are the employer side of income tax to put it simply (SS, Medicare, Unemployment). So for $1000 weekly salary I would as the employer actually pay around $1200, the 200 difference goes to state/fed govt. As the employee I see $1000/week minus my regular income tax deductions.
As the business owner when I take a draw there is no employer side of taxes to pay, so if I drew an extra $1000 per week as an owner I would save that $200 and only owe regular income tax ($1000 salary + $1000 business income as owner).
Click to expand...

We were posting at the exact time that’s precisely what i gathered from Google. I had A business and was set up as a sole proprietor. I’m 99% certain that as a sole proprietor I paid payroll taxes on 100% of my business’ profit. It was ALL considered payroll. If you set up as an S corp what would prevent you from paying yourself $100/week and taking the rest in a draw in order to save the payroll taxes? There’s probably an obvious reason that I’m missing
Click to expand...

ncdriver1 · Mar 3, 2020

johnnyboggs said: ↑

I just googled it and i think i understand it now. If an owner takes a draw, he only pays income tax on that money. He doesn’t pay the medicaid and SSI. Is that right?
Click to expand...

correct.

ncdriver1 · Mar 3, 2020

johnnyboggs said: ↑

We were posting at the exact time that’s precisely what i gathered from Google. I had A business and was set up as a sole proprietor. I’m 99% certain that as a sole proprietor I paid payroll taxes on 100% of my business’ profit. It was ALL considered payroll. If you set up as an S corp what would prevent you from paying yourself $100/week and taking the rest in a draw in order to save the payroll taxes? There’s probably an obvious reason that I’m missing
Click to expand...

well the irs would frown on that lol. I think something like that would get you audited and have to pay a hefty fine.

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