Taxes... Dumb It Down For A Dummy!

You have to remember that even if you have an LLC, you HAVE to pay yourself a basic, competitive, wage. For a driver, I don't know what the IRS will accept, but I'd be nervous setting it at less than $50-60K. We just went through an audit for our state, and they did a wage survey to make sure my pay was in the "reasonable" range -- and it was for my job description.

So, say you take $50K as your driver pay, that leaves only $15K to distribute as dividends -- which essentially only saves you the 15.3% self employment tax. That's a $2K savings... not nothing, but probably not worth the hassle of creating the LLC.

Now, since you are a w-2 employee, you can accept your companies "per diem" plan, and shelter perhaps another $10K from not only FICA, but also work comp, state and federal income taxes. Call it another $3K. That'll pay for the accountant's fee and then some. It would drive your income down and perhaps qualify you for other benefits, such as student Pell grants, reduced medical insurance premiums, etc.

You can also be a GREAT employer (of yourself), and offer other employee perks such as education benefits, clothing allowances, personal use of company vehicles; GENEROUS company SEP retirement matches; just don't get TOO enthusiastic with the benefits. Don't go beyond what a GREAT employer (competitor) offers. You'll end up having to justify it to a government drone at some point. Still, you should be able to shelter another $5-10K from taxes that way.

 

Yep, that's about what I saw. My CPA had me making contributions to a Roth which helped my taxes a bit. And some years later, I'm pretty happy with the return.

 

That's the NUMBER ONE thing that is bought up after LLC is mentioned - liability, lawsuits, accidents. It has nothing to do with it.

Any half decent lawyer will pierce through the thin veil of a LLC IF WE ARE TALKING ACCIDENTS AND LAWSUITS.

It's simply a tax structure to legally permit you to pay less taxes as a 'one truck chuck'. Does almost nothing to fend off the attorney vultures.

If MCARTHUR TRANSPORT LLC ran over a bus full of nuns tomorrow - believe you me, I'll be sitting next to a guy in prison that did the same thing as a sole proprietor, but he will have paid more in taxes over the years.

 

You won’t get buried with taxes your first or second year. It’s usually the third year that gets people when all their depreciation is used up.

For reference I’m a one truck guy leased to a carrier. I file as a sole prop because at the end of the day for me it’s a wash money-wise to incorporate. Pay a little more in taxes or pay someone to make sure all the other stuff is taken care of. If you’re driving your own truck the only thing an LLC may do is save you a little money, it won’t protect your personal assets if you’re in an accident.

 

I have plans to eventually buy a truck for cash and lease on with a carrier, but not until I get more experience driving company.

I need to do some homework...I'm another one who thought that part of the reason for starting an LLC was to protect personal assets.

 

I doubt State Farm will do your insurance. I had my personal vehicles through them and they wouldn’t do my commercial probably Progressive will be your only option. If you have a clean record it helps a lot. Also if you can any way pay it all yearly instead of monthly that saves a few thousand for insurance. By the time I got out my insurance was way down from the first.

 

This is why it is great advice to use a trucking CPA instead doing it yourself! But I'd recommend paying reasonable instead of competitive wages. And the reimbursing per diem? That's pure genius!

 

I’m leased to a carrier - they handle the IFTA. It’s usually less than a $500 over/under annually.