Freight Factoring and ComChek a tax deduction?

If what you're recording in your account journal is the amount they are paying you AFTER they deduct the advanced payment charge, what is there to deduct?

Especially since your 1099 matches the payment AFTER the % of deduction.

 

No it is not a write off, just like lost money from out of route miles, deadheading, etc is not a deduction except for the actual costs incurred. Factoring fees, quick pay, and check fees that are deducted prior to you being paid are money not earned. As for the IRS audit, they will understand the percentage deduction and since you did not submit an actual invoice they will use the settlement statements from the broker. The same would apply to customers that give themselves a deduction for paying early with check, it is common for some customers to deduct 5% of the invoice if they pay better than the terms. Since you are a small business using cash basis accounting practices (as most small businesses do) the IRS is only concerned with taxing income that is collected, not future income. Uncollected income is not a loss either for the purposes of the IRS, they are only concerned with the actual expenses incurred.

 

Well, in a normal accounts payable/receivables situation, you would invoice the job for the full amount, include the appropriate discount for advance pay and send them the bill.

If you want to get real technical, when you receive the payment, enter it into the journal so the amount matches the original rate confirmation, then adjust the amount received in the journal by deducting the discount.

 

What you've described is a sales discount. You're offering United Road terms of 5/2 Net 30. Letting them take a a 5% discount for paying you in two days, otherwise they have 30 days to pay the full amount. It's unusual because you get to choose if they take the discount but it's a sales discount and not factoring, where a third party buys the right to collect your invoices in exchange for a discounted amount up front. Sales discounts are a legitimate business expense and deductible.

The fees for Comdata checks are also deductible.