5 Business Deductions for Trucking Taxes

Nobody enjoys paying taxes. As a trucking operation, taxes are a major cost of doing business. Between fuel, tolls, and taxes on tires, parts, and of course Federal income tax, your company has plenty of reasons to keep a sharp eye on how to mitigate your tax obligations.

Luckily, the IRS tax code provides at least a few deduction opportunities that could end up saving your trucking business big dollars. Here is a quick list of five business deductions that can save you on your taxes this year:

1. Medical Expenses and premiums

If you are not covered by a spouse’s employer and your company is covering your medical expenses, these costs, including your insurance premiums, may be deductible.

2. Technology

These days every business, including trucking, relies on technology to conduct business and stay ahead of a fast-changing business environment. The good news is things like cell phones, GPS devices, laptops, printers, and software are probably deductible. So are expenses related to your office; even those small things like copying, postage, pens, paper, etc. are supplies that you may deduct–even envelopes and business cards—that appear to be small expenses until you add up these costs over the course of a year.

3. Membership Dues and Fees

If you belong to an association, did you know that those dues are deductible? So are fees you might pay related to dispatching, as well as the cost of your CDL license. Subscriptions to publications related to your business are also deductible.

4. Uniforms and Equipment

As small business, you can deduct special uniforms or work clothes. But that’s not all. You can also deduct the cost you incur for items related to doing your job, including things like equipment blankets, chains, and tools, as well as locks or straps used to perform your work.

5. Road Expenses

From meals and business travel expenses to the fuel you buy related to your trucking business may be deductible expenses.

A Word About the Section 179 Deduction

We would be remiss if we didn’t mention the opportunity you have as a small business to take advantage or the Section 179 Deduction. The tax code offers this unique deduction for businesses as an incentive to invest in new equipment. The 179 Deduction was designed specifically for small business. It offers a small business to take accelerated deduction of up to $1.08 million in depreciation on up to $2.7 million in purchases in a single calendar year. That means you can deduct the full purchase (or lease) price of equipment—including most business vehicles like cargo vans—in the year purchased. It can be used for machinery, like presses, packaging equipment, or even software investments or support equipment fork lifts. And yes, most over the road tractor trailers should qualify for the deduction. There are special rules for vehicles over 6,000 pounds. You can read more about depreciation deduction on the IRS document referenced here.

With all of these opportunities to save money on your taxes, you would more than likely find that doing your own Federal and State Taxes, as well as your required quarterly tax filings, might be a bit much to handle yourself. To ensure you get the maximum deductions possible, feel free to reach out to our office for a no-obligation consultation about your unique situation.

Accounting for Trucking: 10 Facts to Know

The thing about the trucking business that makes it special is, well, that truckers love the road. Paperwork? Well, maybe not so much. So, getting help with your business accounting is the very best way you can keep your attention on the work you like best.

So, first of all, let’s start with the basics. What is accounting and why should you pay attention to your business accounting?

According to the website Investopedia, accounting is “the process of recording financial transactions pertaining to a business. The accounting process includes summarizing, analyzing, and reporting these transactions to oversight agencies, regulators, and tax collection entities. The financial statements used in accounting are a concise summary of financial transactions over an accounting period, summarizing a company’s operations, financial position, and cash flows.”

So, in plain English, when someone says they are doing accounting work, they could be doing any number of activities related to the books and records that tell the story of your business in terms of money spent, money earned, and money owed. Pretty important stuff.

If all this seems a bit overwhelming, let’s consider these ten things about accounting for your trucking business.

1. Your Books and Records

This is the financial history book of expenses, payments, and deposits made in your business for the year. Good records provide reliable information about the health of your company and is the foundation for financial management and planning.

2. Tracking Expenses, Not Just Writing Checks

Many individuals who own a small business run their company finances out of a check book. But if you want to be successful, you need to track where your money is coming from and where it is being spent. That means tracking expenses by category, amount and date. By doing so, you will start to realize that certain expenses can be economized by rethinking the way you buy. Running to the copy center to make a few expensive copies every other day? How about buying a printer with a copy and scan function instead? Are you writing out invoices on a word processor? Maybe a software that can write invoices and keep track of your outstanding invoices might be more efficient, especially as you get busier and tracking who owes you by memory is no longer an efficient way to work. It all starts with the mindset of tracking expenses instead of just your checkbook.

3. Tax Planning

Getting the most out of the tax code requires some planning on your part. Your tax professional can help you in this department. By sitting down and planning out your known expenses and anticipated income, you can make decisions that will let you leverage deductions available to you and avoid paying additional taxes needlessly. Sometimes a little tax planning will tell you when to make a large purchase—and when it may be best to postpone it to the new year. Since the tax laws change every year, its an idea that every small business should avail themselves. An hour or two of professional conversation might save you thousands in additional tax expenses.

4. Knowing What to File…and When

Trucking businesses have some complicated tax matter to navigate. From fuel tax reporting to state and local nexus issues, the way you conduct your business can have a huge impact on when and where you might need to file important documents. A tax professional can help you navigate this reporting schedule—especially if you have employees—in order to avoid problems with the IRS, the Department of Labor and your state and local tax officials.

5. Knowing What Receipts to Keep

Record keeping is not just a matter of keeping copies of your invoices. So many small expenses are critical to substantiate your on the road expenses. From meals and fuel to repairs and supplies, those small items need to be recorded and receipts saved in an orderly manner to protect yourself down the road if officials ask questions. This is even more important when it comes to contracts, agreements, and insurance policies. Best practice is to keep things like insurance policies in a fire-proof safe place…forever.

6. Profit and Loss

Are you making money or not? If you don’t understand what your true expenses, how do you know that what you charge is generating enough profit to be a worthwhile endeavor? If you lose money on short runs, why do them? Unless there is a strategic reason for spending your time and money on losing activities, wouldn’t it make sense to stop such practices? After a while, a business that consistently loses money is considered a hobby, not a business. To be successful, we urge you to analyze your profit and losses to determine your true costs and arrive at a fee, or hourly rate that your business must achieve to operate at a profit. You should know how much revenue is required to bring on another team member, and what it costs to run your rig every day, including insurance, labor, repair, taxes, etc. Knowing the true cost of doing business is surprisingly not everyone’s top of mind. Many small business owners don’t take the time, and for this reason, they are not successful, or at least as successful as they could be in the long term.

One other thought on this matter. When you know the key performance indicators that drive your business and the true costs of producing your product or service, you can make smart decisions. For example, driving old equipment that is paid for may sound like a cheaper way to work. However, if you know that the old equipment is less efficient, costs more in fuel, requires hundreds of dollars a month in repairs and is more expensive to insure, the actual cost of leasing or buying new equipment over time may actually be more cost-effective while increasing your productivity. If you take this logic to every aspect of your business, you will quickly find great satisfaction in knowing you are running a lean, mean profit machine.

6. Most of my income goes to bills. How do I save for retirement? How do I get started?

No doubt, it’s a hard battle. Yet, as difficult as it might be when you are young, think of how tough making ends meet will be decades from now when you are ready to retire, or if you are forced into retirement due to a disability? Even a small amount of savings every week will make a difference. If you have $20 or $50 a paycheck automatically removed, chances are you won’t even miss the money after a while. Some advisors say taking the cost of a cup of coffee at a Starbucks every day from your budget and moving it to savings could make you a millionaire in 40 years. The point, of course, is that even small amounts at the beginning will deliver you real savings in a few years. The earlier you start, the better off you will be in retirement.

7. Buy or Lease Decisions

As discussed above, the lease verses buy decision depends upon many factors in your financial situation. Leasing is an excellent way to buy the newest equipment every few years without the capital outlay required of an outright purchase. However, one must look at the cost of financing instead of the lease cost. Today’s rising interest costs may make leasing a better value, particularly if bonus services and maintenance are part of the plan. Upfront costs, like deposits and security may impact your decision, as well as mileage overcharge that may impact the back end of your purchase. Often, owners are swayed one way or the other on the basis of cashflow and the upfront costs. Remember, too, that a section 179 Deduction may apply to either a lease or purchase decision, meaning that your transaction may be partially or completely deductible in the current tax year. A few minutes on the phone with your tax consultant might help you decide what the most advantageous way to go might be for your current situation.

8. Payroll and Keeping in Compliance with Labor Rules

Between state labor boards, unemployment and tax withholdings, the small expense of having someone handle your payroll is so far and above worthwhile no argument can be made to the contrary. If you fail to make payments in a timely manner or underpay, your business can face painful scrutiny and penalties from authorities.

9. Financial Statements and Banking Compliance

If you borrow money from a financial institution, they may require that you provide them with some kind of financial statement periodically, but most certainly on an annual basis. To avoid issues, this is another area where your accounting professional can help you handle the compliance reporting while you concentrate on running your business.

10. Cash Flow Analysis

Having your accountant prepare a cash flow analysis is an important step in determining where your is today and where it may be going, financially. A cash flow analysis will help you understand where the money you earn is going, who you are paying and when, and if there are better ways to manage payments to keep more cash on hand for tougher times. Again, your accounting professional is well versed in putting these important puzzle pieces together and helping to guide you to a better understanding of what is working and what needs to be improved in your business. They can help you manage your payables, of course, but they can also recommend ways to improve your receivables as well as give you insight as to which of your customers are A-listers and which ones should probably be replaced with new business.

Understanding these ten financial factors in your business—and getting professional assistance when it makes the most sense—will help you build a better business and create more profit opportunities moving forward. If you are interested in discussing any of these matters discussed above, feel free to reach out to our company for a no-obligation consultation.

3 Ways for Trucking Firms to Increase Profitability

Profits. They ultimately determine if you make a living or go bankrupt. With competition and marketplace challenges running rampant, many trucking and logistics companies are finding it difficult to remain profitable. In these times of challenge, there are still plenty of opportunities to be successful. While that is easy to say, the task of maintaining profitability rests on your tenacity and creativity.

ONE: Efficiency of Operations

Every company has areas that can be improved. It never hurts to examine your processes, from buying to servicing clients and handling billing and cash flow, your operations might need some improvement. One area we are seeing more interest in is outsourcing the accounting, payroll and bookkeeping services of the company. By doing so, the company no longer has to rely upon outdated software, errors from staff or family members that may not be properly trained or have a limited understanding of how books should be structured for quality reporting and efficient data retrieval. Mistakes can be costly. Your outsourced professional can also ensure that quarterly tax filings, as well as state and federal employee filings, are done in order to avoid penalties and unwarranted late fees.

Other operational efficiencies may be found in your purchasing habits and inventory methods. Overhead expenses are another area where economies might be found by alternative sources.

Your accountant can help you move through this process and help you develop repeatable checklists and timetables for routine processes.

TWO: Specialization and Value Pricing Tactics

Value pricing is not a new concept, but many service businesses—especially competitive businesses like trucking and logistics—have been reluctant to see the benefits of this thinking. Perhaps it is fear, or perhaps it is a baked-in dependence on what is proper industry behavior, the time for creative thinking has never been better.

Let’s talk about specialization first. Many industries, even accounting firms, have found that concentrating on particular industries gives them a competitive advantage. By understanding the very unique needs of an industry’s transportation needs, you can develop service behaviors and unique pricing that sets you apart from your competitors. Instead of being one in a hundred people with tires and wheels to rent, you are seen as a careful expert—one of a chosen few—who will deliver the quality and timeliness required of these demanding customers. With specialization, details matter. Dig deep into your client’s businesses. Interview them. What needs do they have that you might be able to deliver for them? Does their business entail unique handling quirks that you might be able to offer as a value-added service? It might be special handling, air conditioning, or some combination of safety and security that you can turn into a process and a value-added service worthy of a premium fee.

The concept of value pricing strategy moves along similar lines. There are a few brave business experts who teach this process. For example, Michelle Golden River, owner of Fore Consulting, is an expert on value pricing, or what she has trademarked as Advanced Pricing Method®, a process that she developed for accounting firms, but one that certainly could be applied to other service firms like trucking and logistics companies. Essentially, firms learn how to explore desired outcomes with buyers before proposing solutions. While her concepts are brilliant and useful, they are not new to the world. You may discover through this mindset that bundled pricing, or retainer-based pricing for some customers creates a more reliable cash flow while delivering better service to a unique clientele. Suddenly, you are no longer a commodity.

THREE: New Customers from New Places

Even if value pricing is not your cup of tea, there are ways to think strategically about attracting new customers. Sales training systems teach us that customers buy from people they like. And, while the industry will tell us that transportation is a commodity, however, that is not necessarily true. The human element is your best differentiator. You have the ability to disrupt the status quo and change the way people think (and buy) your services. Think of recent “disruptors” in other industries, for example. Who would have thought ten or fifteen years ago that people using someone’s car would nearly replace the taxi industry, or that online shopping would topple many retail giants who could not adapt?

The key finding your difference can be learned by examining your customer’s needs and wants and finding new ways to deliver (no pun intended) on their unmet needs. While price and speed are almost always going to be an issue, we know there are other factors that are really important to our customers. It may be special handling due to the fragility of certain items. Perhaps companies that sell sensitive items require security and protection from the elements. There may even be technology applications, such as apps that take a photo of your item in transit and at delivery so the customer can track their package with more confidence. Do drivers look like drivers? What if they looked more like ice cream delivery men, wearing light clothing and a bow tie? That may seem outrageous; however, the point is to find out what inspires confidence in your prospective customers. What problems with delivery remain unmet in their minds? Can you do things better? Can you be a little different? Does your brand reflect these unique characteristics?

A bit of marketing differentiation will set you apart from other companies, make you memorable in a good way, and perhaps give you an edge on return business. Be customer-centric. Always put yourself in the customer’s shoes. Be curious about how things could be better. Above all, ask your customers for honest feedback. Surveys are good, but personal conversations are better. The best time to talk to someone is right after you have concluded your work with them.

A little smart marketing can go a long way in making your business the go-to service.

One last thought on marketing: Don’t try to be everything to everyone. Specialization brings excellence. That may mean narrowing your focus to attract certain types of customers—at the expense of others that don’t fit your profile of an ideal customer. Don’t be reluctant to specialize! It will reward you with customers that appreciate your thoughtful approach. And they may just pay more for the service, too.

How to “Keep on Truckin” When Demand Weakens

How to “keep on truckin” when demand weakens

In spite of the continuing shortage of drivers, small trucking and logistics businesses may be heading into a recession with the rest of the country’s small businesses. Added to the ballooning cost of fuel, a recession will mean competing for fewer customers who are all price-sensitive. This added pressure on profits will make it absolutely necessary to look at every way possible to run a lean, mean transportation operation. While this sounds obvious, the devil is in the details. Here are a few thoughts to help you get started.

Become More Efficient

Motivational speaker and positivity expert Tony Robbins makes some excellent suggestions on his website about running a motivated team, as well as being a more efficient company. His insights cover some wide ground; citing everything from having frequent-but-brief team meetings in order for people to remain focused, to examining operations to determine what best to keep and what best to cut. On the latter subject, we are in complete agreement. Cutting expenses does not mean cutting corners. Rather, cutting expenses is giving all of your operations a careful and complete review to learn where inefficiencies—and redundancies—might exist.

Your bookkeeping and accounting, for example, may be perfect tasks to transfer to an outsourced remote service. An outsourced solution ensures you have access to professionals, the latest technology, and of course accurate information without the cost (and downtime) associated with an employee.

Cutting Expenses

Some purchases are mandatory to keep a business running. Others are somewhat discretionary. One of the most common perks, excuse the pun, is the company coffee supply. Everyone likes a fancy cup of java, however, an expensive coffee service can be replaced with periodic trips to the big box club store for coffee and supplies.

Keeping office supplies inventory under lock and key is another way for some businesses to reduce waste while stopping employees from stocking their homes with your office supplies.

Larger expenses, like copiers and other equipment leases, should be reviewed for less expensive (or more efficient) alternatives. Don’t forget to look at vendor purchases to see if you can find less costly alternatives for products that are purchased to keep the fleet maintained and other business-related materials.

Reduce Overhead

In a growing economy, many businesses let overhead creep up. Tightening your belt might mean rethinking how things get done. Perhaps that might mean repairing instead of replacing everything. Or squeezing an extra year out of an older, but adequate piece of equipment.

Reducing overhead may also mean looking at the physical space you require to conduct business. Since the advent of Covid-19, many businesses are finding they can get buy on less square footage. If that is true in your business, you may want to consider subletting a portion of your shop to offset some of your rent expenses. Alternatively, sharing resources in exchange for rent is a way to help a growing business survive. Perhaps you have a big repair shop with bays that are not used after 5 pm. Those idle hours could be rented to another business for onsite repairs and servicing.

Invest in Marketing

When you are hungry, you know it is time to hunt. So, if business is down, one activity you must increase is marketing. If you are not yet active using social media, this is the time to start. Be part of your local and industry associations, business organizations, and the associations of your client’s industry. That is where you will meet the people who will become your new customers. It may also be a time to invest in sprucing up your website, start some discussions on LinkedIn, and send out emails to the folks that you call friends, clients, and referral sources.

Look for Advertising Partners

This one may not work for everyone, however, some companies find extra money can be made by allowing companies to advertise on their vehicles. Not everyone gets Goodyear or Coke on their jackets, but you may be able to get your local parts shop or tire store to promote in your space in exchange for cash or even a barter of services. Be creative! It never hurts to ask.

Avoid Foolish Shortcuts

It goes without saying that some cuts are foolish. Don’t shortchange your insurance, or ignore paying your taxes. Certainly don’t skip maintenance or safety upkeep at the risk of your people and equipment. It really takes a bit of strategic thinking to plot out a plan for cost savings and survival when business gets tight. However, preserving capital and running lean while increasing your sales and marketing is the best way to survive—and maybe even grow—in a downward economy.

Tax Planning for Truckers

Making the Most of Every Deduction

Whether you are an independent rig owner or head of a transportation company, you work hard for every penny earned on the road. So, while tax planning may not be on the top you your mind, it should be given some honest attention, especially when dealing with the IRS and State revenue agencies.

As an independent contractor, you probably receive a form 1099-MISC at the end of the year from the company or companies you worked for during the year. If you are operating as an unincorporated sole proprietor (not a partnership or S-Corp or C-Corp) you probably will be deducting your expenses on Schedule C when you have your taxes prepared.

Deductions You Probably Know

The tax code is complex, but luckily it provides opportunity to deduct many of the costs of running your business. Here are a few of the most common items:

Tools
Supplies (like gloves, tarps, and chains)
Vehicle repairs
Home office expenses
A percentage of your meals
Overnight travel expenses
Vehicle insurance premiums.

Deductions You May Not Know About

Your profession has unique requirements to perform your job. Some of your job expenses may also be deductible on your annual tax return. For example, any training you may have paid for to successfully pass your CDL exam or improve your business skills. Or the cost of dues for any association you are a member of that is related to your business. There are other items that you may not be aware are legitimate deductible expenses you may take advantage of to reduce your tax obligation, including:

Depreciation on your truck
Tolls and parking fees
Fuel Costs
Technology, including laptops, cell phones, software and printers
Certain medical expenses.

Even if you lease your vehicle, or perhaps rent a trailer periodically, you may be able to deduct this expense on your tax filing. Record keeping is critically important for justifying many of these deductions, especially reimbursement for fuel expenses, as well as small items such as supplies and repair costs, tires, etc. If you don’t already use a software tool, consider investing in one. Utilizing Quickbooks or a similar program will make your life so much more organized and prepared in the event your accountant or the IRS have questions down the road.

Being in your own business has many challenges as well as a few perks. The limitless opportunities of being your own boss may be tempered by the everyday challenges of making your customers happy, however the rewards are real. By taking every advantage the tax code provides your small business, you can realize greater profitability and maybe even find opportunities to grow that you never knew existed. If you are interested in discovering more, feel free to reach out to our professionals for a no-obligation conversation about your needs, goals and plans.