Actual Annual Lease Op Numbers

Topic 25019 | Page 3

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Robert B. (The Dragon) ye's Comment
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Not to try to sway anyone towards a lease because I won't but I do want to address the issue of taxes since it's constantly part of the conversation. If you hire a good cpa and use all the deductions available, a reasonably smart lease driver will pay very little, if any income taxes because virtually everything is a deduction. You'll look like crap on paper once it's done so making a major purchase could be more difficult but the tax liability will be very small.

Splitter's Comment
member avatar

I did this for many years as an independent contractor & I still had to pay. The determining factor is following industry stands. Trying and claim too much to pay as little as possible will get you a dreaded audit by the IRS. If your good CPA is worth this weight, you'd pay about 20k in taxes for 100k in earnings.

If you want to test that? You'd better have the receipts for your deductions. Otherwise, you'll be facing some serious problems.

I once spoke with a lease OP in Prime who broke it down like this, he only ran his truck at 60 mph tops, he ran routes that avoided as many tolls as possible. He cleared $100k but he also trained. That was after paying $24k in taxes. Did I see his paperwork? No. But he was willing to show me, I just didn't want to get that involved since my butt is staying company regardless.

OWI:

Operating While Intoxicated

Robert B. (The Dragon) ye's Comment
member avatar

I did this for many years as an independent contractor & I still had to pay. The determining factor is following industry stands. Trying and claim too much to pay as little as possible will get you a dreaded audit by the IRS. If your good CPA is worth this weight, you'd pay about 20k in taxes for 100k in earnings.

If you want to test that? You'd better have the receipts for your deductions. Otherwise, you'll be facing some serious problems.

I once spoke with a lease OP in Prime who broke it down like this, he only ran his truck at 60 mph tops, he ran routes that avoided as many tolls as possible. He cleared $100k but he also trained. That was after paying $24k in taxes. Did I see his paperwork? No. But he was willing to show me, I just didn't want to get that involved since my butt is staying company regardless.

My disagreement is that by the time you deduct, fuel, insurance, truck payments, per diem and everything else, your tax liability is significantly less than 100k. There are a ton of write offs that a lot of people never claim but are eligible for which are perfectly fine and will not leave you as a target for an audit. Besides, if you've set up an LLC like you should, the fear of an audit is significantly less as long as you're playing by the rules and doesn't effect your personal accounts, assets etc.

Like I said, I'm not trying to justify doing it, been there done that. I'm just trying to add a little light to the tax situation which is something nobody addresses aside from bringing up paying them.

Per Diem:

Getting paid per diem means getting a portion of your salary paid to you without taxes taken out. It's technically classified as a meal and expense reimbursement.

Truck drivers and others who travel for a living get large tax deductions for meal expenses. The Government set up per diem pay as a way to reimburse some of the taxes you pay with each paycheck instead of making you wait until tax filing season.

Getting per diem pay means a driver will get a larger paycheck each week but a smaller tax return at tax time.

We have a ton of information on our wiki page on per diem pay

OWI:

Operating While Intoxicated

Avvatar's Comment
member avatar

Rainy, thanks for posting this up. We FNGs hear you guys talk about not falling into a lease or O/O trap. And most of us agree. For those of us who are more numbers oriented, this thread is very helpful. Often times, preaching and teaching is just not as effective as RAW DATA. This throws a different light on things for that type of person.

you're post has really shown HARD EVIDENCE that the lease and/or O/O programs aren't such a hot idea.

HOS:

Hours Of Service

HOS refers to the logbook hours of service regulations.
Rainy D.'s Comment
member avatar

Not to try to sway anyone towards a lease because I won't but I do want to address the issue of taxes since it's constantly part of the conversation. If you hire a good cpa and use all the deductions available, a reasonably smart lease driver will pay very little, if any income taxes because virtually everything is a deduction. You'll look like crap on paper once it's done so making a major purchase could be more difficult but the tax liability will be very small.

It is constantly part of the conversation so that people understand the figures I am posting. Many lease ops will say "I cleared..." but that does not include health insurance, taxes, disability, life insurance, vision, dental, paid vacation, 401k contributions etc. When you add the additional benefits we as company drivers get, in addition to most of us getting more time off than lease ops, I am.constantly shocked that many company drivers make more. It is very important to point that out when comparing the two.

I have yet to meet a teaming lease op who has told me they paid under $14,000. One solo guy told me his adjusted gross for taxes was $60,000 and he paid $7,000 in taxes.

Honestly, I am not even sure if that includes medicare, social secuirty, employer tax etc. Those are the real figures they gave me. Since 2 are my close friends, i saw the tax return with my own two eyes, but at the time I was only interested in tax due, not going through their personal stuff anymore than I needed to find tax liability.

HOS:

Hours Of Service

HOS refers to the logbook hours of service regulations.
Old School's Comment
member avatar
by the time you deduct, fuel, insurance, truck payments, per diem and everything else, your tax liability is significantly less than 100k. There are a ton of write offs that a lot of people never claim but are eligible for which are perfectly fine and will not leave you as a target for an audit.

Robert B makes a legitimate point, but for me it confirms Rainy's point. We like to call these things (expenses) "write-offs" because it makes it sound like we're getting away with something and hiding our income. A good CPA is only showing what you're actual income is. That's hard for most self employed people to accept, but it's the truth. They like to think they're making a ton of money and their CPA is somehow hiding that from the government.

Any good CPA will tell you, "You're going to pay taxes on what you owe." If you lose money a few years they can amortize it out so that it helps with your taxes when you make money for a few years, but if you're making money you will eventually be paying what you owe. People like to think their CPA is above the law and can therefore make them "look like crap on paper." I've found that the picture my CPA paints for the IRS is painfully realistic. It all depends on how realistic you're willing to be with yourself.

Per Diem:

Getting paid per diem means getting a portion of your salary paid to you without taxes taken out. It's technically classified as a meal and expense reimbursement.

Truck drivers and others who travel for a living get large tax deductions for meal expenses. The Government set up per diem pay as a way to reimburse some of the taxes you pay with each paycheck instead of making you wait until tax filing season.

Getting per diem pay means a driver will get a larger paycheck each week but a smaller tax return at tax time.

We have a ton of information on our wiki page on per diem pay

OWI:

Operating While Intoxicated

Rainy D.'s Comment
member avatar

Also, and I admit, I am nooooo expert in tax filings... but, most things are not 100% deductible, correct? When you deduct it, isnt it only a percentage?

Dm:

Dispatcher, Fleet Manager, Driver Manager

The primary person a driver communicates with at his/her company. A dispatcher can play many roles, depending on the company's structure. Dispatchers may assign freight, file requests for home time, relay messages between the driver and management, inform customer service of any delays, change appointment times, and report information to the load planners.
PackRat's Comment
member avatar

Also, and I admit, I am nooooo expert in tax filings... but, most things are not 100% deductible, correct? When you deduct it, isnt it only a percentage?

You are right, the deductible is a %.

Dm:

Dispatcher, Fleet Manager, Driver Manager

The primary person a driver communicates with at his/her company. A dispatcher can play many roles, depending on the company's structure. Dispatchers may assign freight, file requests for home time, relay messages between the driver and management, inform customer service of any delays, change appointment times, and report information to the load planners.
Rob T.'s Comment
member avatar

Robert (Dragon), or Sid V if you dont mind sharing, how do you handle your quarterly tax payments? I'm not real knowledgable about taxes but just curious how you estimate what your income would be for the quarter as i believe you're supposed to pay taxes at the beginning of the quarter. Do you pay the quarterly taxes based on the income or break it down to what you would actually owe after the deductions you take?

Rainy D.'s Comment
member avatar

To be clear, I am.posting these because I wanted new drivers to see they aren't making the quarter of a million dollars a year newbies assume leasing would be.

In addition to trying to learn to drive, not hit anything, time manage, trip plan, pre trip, learn maintence and repairs of the vehicles, build a relationship with dispatch, and keep their sanity.....some of our brand new drivers want to attempt leasing. That is a whole new learning curve.

I know one solo lease op who upgraded and got his truck 4 weeks ago when i did. He has not had one week with more than $800 deposited into his bank. My last student grossed $1500 his first week.

Bottom line, newbies shouldn't lease. I respect someone's ambition and desire to try it. But they need to meet some lease ops, learn the freight lanes, understand the fueling and net fuel costs, not just chase the revenue but high revenue low miles. They need to read the contract and understand every cost and its ramifications. Most new lease ops cant give you a good goal figure or what their costs are. That is bad.

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