Taxes... Dumb It Down For A Dummy!

Discussion in 'Trucker Taxes and Truck Financing' started by The_SnowMan710, Jan 2, 2025.

  1. The_SnowMan710

    The_SnowMan710 Bobtail Member

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    Dec 17, 2022
    NE Nebraska
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    Sorry if this has been covered elsewhere but remember, I'm a dummy...

    Can someone explain (in small words) how the taxes for owner operator's with an LLC work?

    I've read that the self employment tax is 15.3% but I assume that's just for the federal side of things? Will more than that be owed to the state? I've read a good rule of thumb is to save 30% for taxes... what is the other 14.7% for?

    Secondly, are your taxes paid off of your gross income before or after expenses are paid? I would assume that it's derived from your gross before expenses but would like to clarify that.
     
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  3. Opus

    Opus Road Train Member

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    2 tips......
    1. save your receipts for EVERYTHING you do for that truck......including cleaning supplies.
    2. Find a good TRUCK CPA
     
  4. blairandgretchen

    blairandgretchen Road Train Member

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    South west Missouri
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    Fellow Dummy here.

    Big loose random numbers here,

    Scenario ONE -

    Snowman710 is taxed as a sole proprietor. He has 1099 revenue (gross revenue) of $200k. He has expenses of $100k. Now he gets to pay taxes on the remaining $100k profit.

    Scenario TWO -

    Snowman710 opens up "Snowman710 LLC" as an LLC taxed as an 'S'Corp.

    Snowman710LLC hires a guy - lets call him Snowy (YOU), as an employee, and pays him a salary of $75,000.

    So now - Snowman LLC has 1099 revenue of $200k, leaving $100k in profit - but wait, now has to pay Snowy $75k - which is a business expense. Snowy pays regular payroll taxes and gets a W2 - and now SnowmanLLC only pays business taxes on $25k profit.

    We are set up this way, and pay a CPA to file the increased amount of paperwork that this structure generates.

    I'm not sure if that helps any, but that's the rough guts of it.
     
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  5. blairandgretchen

    blairandgretchen Road Train Member

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    South west Missouri
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    Yup. Reciepts for EVERYTHING. office supplies, phone subscriptions, ELOG device and service, boots, PPE, XM subscription, business lunches, fuel, additives , repair, maintenance, parking, tolls, - organize it yourself and monthly. Scroll through credit card statements to make sure you don't miss anything.

    I wouldn't even consider attempting to file our own taxes as LLC - Find a good TRUCKING BUSINESS CPA.
     
  6. The_SnowMan710

    The_SnowMan710 Bobtail Member

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    Dec 17, 2022
    NE Nebraska
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    Thanks for the responses, fellas! I'm definitely going to find a trustworthy CPA to handle the paperwork shuffle. I file my own personal taxes right now but that's just a simple W2 from my current employer, so not much there I can mess up. I'm running hypothetical numbers and just want to make sure I'm figuring my estimates right so I have a real world idea if this will pan out. Whether you figure your taxes on gross or net income will greatly change what the bottom line looks like and don't want to mess that up in my estimated numbers.

    Good point on the difference between sole proprietorship and S-corp, Blairandgretchen. That's another one of those things that I continue to overlook. As of now (and as far into the future that I've planned) I'll be the only driver. That may change in the future if my kids show any interest but that's 15-20 years down the road.

    Certainly is a lot to ponder!
     
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  7. Opus

    Opus Road Train Member

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    Step 1, is find a good TRUCKING CPA first, and he'll tell you what you need to report. It's a lot easier than trying to do it on the back end.
     
  8. blairandgretchen

    blairandgretchen Road Train Member

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    South west Missouri
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    No problem.

    As I understand it - the higher your business revenue, the better the tax savings are. There's a cut off point on the lower revenue side, where it becomes a wash.

    Setting up an LLC is reasonably simple - file with your state. There is a form to send to the IRS that elects your tax status as an 'S' or 'C' corp, that I think has to be done at the start of the year (whether by rule, or simplification).

    The rest is paperwork. Lots of it. My wife processes my payroll and pays the quarterlies, Fed and state - unemployment etc. Or you can pay a payroll service to do this (most good CPA's offer this). I keep my receipts all tidy , then we hand off to the CPA at the end of January, pay him his $1500 or so - and the job is done.

    So far as 'setting aside for taxes' - she pulls 18% off the 1099 revenue for each settlement and sets aside in a separate account that ONLY pays monthly/quarterly/annual tax related expenses. We have never had to scratch around at tax time for additional $$ to settle with the taxman.
     
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  9. blairandgretchen

    blairandgretchen Road Train Member

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    Can't stress that enough - there's things to be considered like "how many members in the LLC" - projected revenue, blah de blah, that need to be addressed before putting anything in place.

    Not sure where you are, but we use 'CPA Group' here in SW Missouri. The first tax guy I visited SAID he handled lots of truckers taxes, but failed on 2 or 3 trucking related questions.
     
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  10. SomeCanadian

    SomeCanadian Light Load Member

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    Does that 18% also manage to cover ifta short falls?
     
  11. OldeSkool

    OldeSkool Road Train Member

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    This is an interesting post to me. I had my own truck for 7 years and never had an LLC since my insurance said it would do me no good in an accident anyway, and it would make it more expensive. Largely the reason I got out, was taxes literally ate me alive. I tried 3 different CPA’s and not one of them recommended I do anything different than I was doing. They all said a self employed guy paid a lot of taxes and that was normal.

    The amount of taxes I paid made it ridiculous to be self employed. I’m sure I added to some politicians coffers to I guess there’s that.

    In fact here’s a very rough estimate of how my year’s averaged running local.
    Total gross $150,000
    Fuel $50,000
    Truck payment and expenses $35,000
    Net money saved $65,000
    Taxes averaged anywhere from $12-15,000
     
    Last edited: Jan 2, 2025
    Reason for edit: Added info
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