working for a "mom and pops" trucking company

1099's used to be a way for a small outfit to get around insurance. you're a private contractor using their equipment. It would be an easy way to find out what a o/o goes through with the day to day expenses without having truck payments.

 

drove for a carrier with 8 trucks and had a great time.

he was a former driver.

pay was out standing. he had good contracts.

as a company driver I was paid $2200,flat rate, to run from Charlotte Nc to Reno Nv.

no rush ,just, had to do it within 2 wks. lol. be back for the next run.

his equipment was leased from Penske.

then after 4 yrs. he went under in 2009. fuel killed him.

 

It still is 'a way for small outfit(s) to get around insurance'. I was blatantly told this at interviews with ma-&-pas. It is also a way to get around workers' compensation insurance payments.

I believe this practice will be changing--or at least it should change. It goes against common sense and what I have learned over the years. When I think of an independent contractor, I think of a 'one-time' deal or atypical operations of a company.

For example, a general contractor contracting an electrician to wire the house he is building. Another is a local trucking company contracting a seldom received California load originating in Chicago to an O/O.

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On going performance for a company that has control over the driver and such driver who is operating in the main function of a company's operations has to be an employee to the objective person. In Roberson v Industial Commission, 225, Ill. 2d 159 (2007), it was determined that even if the driver owns the Power Unit, the driver can still be considered an employee, all else considered, simply if he leases a trailer from the company.

Not even close.

IF the 1099'er pays the tolls, IF the 1099'er pays the truck expenses like flat tires and oil changes, windsheild wipers, turbocharger, DEF, IF the 1099'er can refuse loads, IF the 1099'er can plan his own loads, IF the 1099'er has to buy the IFTA stickers, IF the 1099'er has to buy the fuel, IF if if if....

Moreover, the depreciation of the truck or the lease write off is one of the biggest, if not the biggest, financial benefit of being an O/O. Being 1099'ed and treated like an employee is a lose-lose for the driver.

You get none of the freedom of an O/O and none of the 'real world training' of an O/O. You get none of the benefits of being an employee (workers' compensation, unemployment insurance, maybe vacation and 401k), and all of the constraints (you go here!).

You also likely get a 7.65% haircut to your pay because as a 1099'er you will have to cough up the Employer share of FICA/Medicare.

 

Fiddle Sticks, how much of a lease payment or depreciation can an O/O deduct?

 

Many years ago i would only work on a 1099.I wanted to do my own ''TAXES''.I saved and had a bit more right offs than a ''company'' driver.Where it hurt me was in the social security.

In the near,i made out great.In the far (social security) i would lose.Because i did not have a huge NET.So this would hurt the far.

In the end it worked out as far as ''cash'' in the hear and know.It hurt in the Social Security and in the far.It also hurt me as far as getting ''credit'' under a DBA.I had no paper trail..

These days i would do the 1099.I want my cash now and invest my cash in the now.!!!!!...Retirement is just a Ponzi Scheme and a FANTASY that may or may not be there..Get your cash now.I trust me more than any GOVERNMENT EVIL NUT..

 

An equipment lease payment is 100% deductible.

An equipment loan payment only the interest is deductible, but the equipment is also on one of several types of depreciation schedules which are also deductible.

In the end, it really is a wash with a slight benefit going to an equipment lease overall.

 

Actually if you do a lease to own, you can depreciate the equipment and write off the interest on the lease payments as well. If it is a lease where you turn the equipment in at the end of the term then you can only deduct the lease payments. Personally I think the lease to own is a better option.

 

Depreciation can only be taken on (1) a qualified business asset (such as a Class 8 Tractor) that you purchase and hold title to even if the title is encumbered with debt (a lien), or (2) a qualified business asset (such as a tandem container carriage) that you both (a) 'capital' lease and (b) will have what the IRS calls 'The incidents of Ownership'.

+ + + + + + + + + + + +

The IRS states that the Incidents of ownership in property include the following.


* - The legal title to the property.


* - The legal obligation to pay for the property.


* - The responsibility to pay maintenance and operating
expenses.


* - The duty to pay any taxes on the property.


* - The risk of loss if the property is destroyed, condemned, or diminished in value through obsolescence or exhaustion

+ + + + + + + + + + + + +


If the lease is not a capital lease, then it is an 'Operating' lease; in other words, the sole incident transferred from the lessor to the lessee is the right to use the asset.

As such, all amounts paid on an operating lease are written off as a period cost, i.e. expensed against income on the financial statements for the year. The entire amount of an operating lease is so deducted.

-----------------------------

If you are operating leasing, then you know what you can deduct. Edit: After further review, whether you are are operating or capital leasing, the entire payment may be written off. The Capital lease payment is made up of the recovery cost of the asset, the implied interest, and any 'executory costs' such as taxes and licensing, maintenance, etcetera.

For purchasing an asset, more work is involved as to what month and year you put the asset in service , how much you paid for it , how much of a salvage value you estimate, whether you took a Section 179 deduction, and which depreciation method you use.

Additionally, any payments such as interest on the loan to purchase the asset are written off in the period they are incurred. For example, if in 2012 you had XYZ interest incurred related to acquiring the asset, you deduct those payments in 2012.

EDIT II: Your tax deduction for the period may be more than your payment on the asset for the period if you use an 'accelerated' method of writing off the asset. MACRS and Double-the-Declining-Balance are two such methods.

This is the key financial point I was referring to onee1956 and which landstar8891 may be using at least in part to get his tax liability down to a point that he does not have to pay the Social Security and Medicare taxes. Depreciation is a non-cash expense recovery of the cost of your asset.


Additionally. any taxes paid and licenses obtained to put the asset to work are written off as period costs. For example, the sales tax, the IFTA stickers, city sticker, and power plate for a Class 8 tractor.


Fill in the blanks in the above paragraphs and I will estimate what I believe would be an IRS audit proof deduction amount for March 2013 and April 2013.

===================

As a side note: the IRS uses 'Property' in its depreciation schedules to obligate the taxpayer as to how many years of depreciation the taxpayer must take to write-off an asset to its salvage value.

* - Class 8 tractors are 3-year Property

* - Class 8 trailers and container carriages are 5-year
Property

* - Containers for Class 8 carriages are 5-year Property

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Technically, the IRS, for 3-year Property for example, will make the taxpayer take the depreciation over four years--what is allowed is 1/2-year's worth of depreciation in year 1 and 1/2-year's worth depreciation in year 4. Other Property years are similar.

 

Wow Sticks you're good. What are doing wanting to drive? You should be a trucker-centric accountant.

 

Nothing you wouldn't know if you went to the IRS website and read up on small business taxes.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deducting-Business-Expenses

And depreciation that Sticks is talking about is specifically here.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/A-Brief-Overview-of-Depreciation