What Is The Deal With 1099 Trucking Jobs? Is There A Catch?

Yeah after doing research, even at $1500 a week, it would not be worth it. $1500 a week would be more than I've ever made in my life. However medical insurance is a pretty big thing for me. And looking up what health insurance would be, let alone putting things aside for other things like tax and retirement. Just not worth it, not sure what companies are paying nowadays, but I doubt $1000 a week would be that far off with little experience since allot of training pay is $900 right now.

As a former business owner I know all about taxes and 1099 work. I’ll just give you the basics here. First off it is illegal to have people working for you, driving your vehicles, using your equipment, tools, etc… and pay them as subcontractors(1099). 2nd, as a subcontractor you need to carry your own insurance to cover any liability. 3rd, if whoever your working for is getting away with it, you are responsible for your taxes, you need to pay your quarterly taxes to avoid end of year penalties which means putting away a 3rd of that $1500 every week. If you come up short with your tax payments, it could end up costing you1/4-1/3 more as the IRS charges interest daily on money owed.

Other things that have already been addressed that you will have to figure out and pay for are… medical, dental, or eye insurance. retirement plan. Stash money away in case you get hurt cause there’s no workers comp or disability.

If your buddy has a few trucks but can’t afford to run a business legally, thats a red flag that he’s not doing very well or has not done the proper research to run legal business and is trying to learn as he goes. BAD IDEA, one too many mistakes and he’s in a hole he can’t get out of.

An old landscaping colleague I know was paying his guys as 1099 subcontractors when he 1st started his business because he couldn’t afford to do it legally until he built it up some. He submitted the 1099’s for his taxes but the guys never filed or paid their taxes. The IRS came after him for all the back tax plus Hefty penalties. Almost put him out of business. Although also illegal, he would have been better off paying them under the table and eating the higher taxes on his gross profit then what it cost him in penalties

This brings up something that I've been curious about, which is subcontract labor. Why can't a carrier subcontract out labor only (driving in this case) to a business comprised of a CDL holder (subcontractor) while letting the subcontractor use their assets. The subcontractor has to establish that they are an independent business entity, file their taxes, maintain GL insurance and workers comp or a waiver in states that allow.

We used to let our subs use our assets frequently. In order to subcontract for us, they had to meet the criteria establishing themselves as an independent entity. It's the way most of new home building is done.

I still own a business, why couldn't I, as a business, if I wanted to pony up for my own workers comp, (cheaper for truck drivers than carpenters believe it or not) and renew my GL policy, have checks made out to my business for providing skilled labor services and the file taxes as any other business would, quarterly with access to write offs. In my case, a schedule C.

In other words get paid like a lease op but without having the albatross of a lease. It seems like it would be a winning solution for both parties. Although if carriers are making money of leases they probably want to keep that revenue. I would still think it's cheaper for them to pay subcontract labor than suffer liability and labor burden of in house employees

It's quite common in many other industries to use nothing but subcontract labor. It makes me actually wonder frequently how we are in house employees yet we get paid piecework (by the unit, by the mile). States that ive owned business in stipulate that W2 employees must recieve base hourly pay, or salary and can not be compensated primarily by piecework.

In order to subcontract for us, they had to meet the criteria establishing themselves as an independent entity

Davy, there are very specific guidelines from the IRS concerning this. You obviously know that. One of them is that the subcontractor must provide their own tools and equipment. Another is that they determine their own start and finish time.

A lot of businesses get away with using 1099 labor which isn't technically legal. The construction businesses is full of it, and the IRS doesn't have the enforcement personnel to control it.

If I am a contractor who needs to set some roof trusses, I contact a crane service to lift the trusses for me. The crane service provides a crane, an operator, and the necessary rigging. They tell me they can be there at 0700 Tuesday morning. They set the rate they are charging me - let's say it's $225.00 per hour. They spend 10 hours on the job and bill me $2,225.00. I pay them as a 1099 contractor. That's perfectly legit.

Now let's say I actually own an old crane truck and don't need to contact a crane service. If I provide the equipment needed, then the person operating my equipment is supposed to be compensated as an employee. These lines get blurred all the time. Especially in the construction business.

I may provide my crane to help the roofing contractor get his materials up on top of the building. The roofing contractor is a 1099 subcontractor. He should be providing his own way to get the job done, but he gives me a good price and I help him out a little just to expedite the job. I didn't charge the sub for the use of my crane. I just helped him out. That kind of stuff goes on a lot. The contractor is just doing what he can with his assets to get the job completed.

States that ive owned business in stipulate that W2 employees must recieve base hourly pay, or salary and can not be compensated primarily by piecework.

The transportation business has a federal law allowing for a different form of compensation. This goes way back. Hopefully somebody here can provide more details for you. I don't have the time this morning to look it up.

Yeah after doing research, even at $1500 a week, it would not be worth it. $1500 a week would be more than I've ever made in my life. However medical insurance is a pretty big thing for me. And looking up what health insurance would be, let alone putting things aside for other things like tax and retirement. Just not worth it, not sure what companies are paying nowadays, but I doubt $1000 a week would be that far off with little experience since allot of training pay is $900 right now.

I am a W-2 driver into my 2nd year of driving, and I am averaging $1600/week gross with full benefits. I am on cpm @ $.48. I am doing this with a 2,300 mile/week average. You can do a whole lot better than 1099 @ $1,500/week. In fact, unless you have no other options, I would avoid any and all 1099 positions.

Hey Harvest, you asked, "Is there a catch?" The "catch" is that to the uninitiated it sounds like you'd be making more money. Now that you've got a little more information, you did the math and figured it out. Good for you!

Being a rookie always has its struggles. One of them is the pay. Doing well in trucking is really dependent on the person behind the wheel. You've acknowledged your past mistakes and immaturity. Get started now with a solid company that has a large fleet and practice improving your net results. That's where the money lies. You have to be really productive. Remember when being paid for the level of work you do means you have to be getting a lot done.

There is a lot of complications to being productive, but the professionals out here conquer those things like foes and enemies. Just understanding how to drive the truck is a very small part of the formula for success at this. Put in some time and keep in touch with people like the drivers here in this forum. There's so much to learn until you start earning really good money. You can do it, I'm confident of that.

I've got a friend on my fleet who made fifty thousand dollars two years ago. I made twice that. We both have the same rate of pay. He started asking me for some advice. This past year he earned eighty thousand dollars. He just needed some help understanding things that help you get more and better loads. Nothing changed with his pay rate, yet by learning how to be more productive he increased his pay by thirty thousand dollars. He's still got room for improvement. Most of us do, but it takes resolve and commitment.

I work as a 1099 contractor (consultant) in the oilfield. The tax implications discussed below should be similar for any business.

As to how this applies to trucking – for 1099 to be worthwhile I think one would have to be paid at a considerably higher rate (I’m thinking 2x to 3x higher) than a company driver. That doesn’t take into consideration the other issues involved as pointed out by Old School, Delco Dave, PackRat, and Zen joker.

I bill the oil companies through a consulting company that takes 10% of my day rate and provides liability insurance and workman’s comp, as well as paying me the same week that I invoice instead of me having to wait for the oil company to pay. Since my wife is employed, we have health, dental, and vision insurance through her employer. If I needed to get my own health insurance the BCBS plans available through the consulting firm range from $900 to $1,550 per month for me only. Those are the rates for age 64+. For a 21 year old the rates are from $300 to $500 per month and increase based on age.

For me, there were three ways to set up a business as a contractor: sole proprietor, LLC, and S-Corporation. Each one has its own tax implications. When I first started I ran as a sole proprietor for a few months before getting my S corp set up.

A sole proprietor is responsible for the Self-Employment tax (Social Security), Medicare, and income tax on every penny earned. SS tax is 12.4% and Medicare is 2.9%. Income tax can be estimated based on what one expects to earn. So for starters, there’s 15.3% of gross taxed, not counting income tax. I live in Texas, so there’s no state income tax to consider.

I have not operated as an LLC, but my understanding is that any money earned by the LLC becomes taxable once it is withdrawn from the LLC, and is fully taxed like the sole proprietor example.

I operate as an S-Corporation. I have to pay myself a “reasonable” salary. Technically half of the SS tax is withheld from my salary and the other half paid by the S corp. Same for Medicare tax. I withhold 20% for income tax. The SS, Medicare, and income tax are paid monthly via form 941. I also pay a quarterly payment since my wife and I have other income from investments. My main expenses are vehicle expenses (gas, tires, oil changes, repairs) and FR clothing, all of which I pay for through the S corp. I also pay unemployment insurance. In 2022, mine was $0 for the state of Texas, and $42 to the feds since I’ve not filed any unemployment claims on myself.

The tax advantage of an S corp is that anything left over after my salary, taxes, and expenses are paid can be taken as a “distribution”, and is not taxed (by the Feds, states probably vary, but -0- for Texas). For 2022, as percentages:

Total 1099 gross receipts = 100% paid out as follows: Salary = 37%, Taxes = 11%, 401k match = 8%, Expenses = 2%, and Distributions = 42%.

The taxes were 30% of my salary.

Harvest, you're young enough to probably not even be thinking of Social Security YET lol BUT it makes a BIG difference down the line when your employers have paid HALF into your weekly SS taxes. Imagine 30-40 years from now, you only had to pay half from your earnings...I never thought of any of that stuff back in my youth, cashed in my Waste Management stocks, in 1989. Now if I had held onto those, they mighta been worth a LOT more than the $3,500 I got. 15 years off n on I worked under table mechanic jobs, didn't pay into my SS acct. I did hold maybe 3 jobs in between where I was a W-2 employee. BUT the biggest boost into my SS acct before retiring was last trucking job, @ 60cpm/3000+ miles where I NETTED $1,500+ a week after $400-500 out for taxes. So all this prior time you have bounced in and out of trucking maybe you coulda been already making BIG BUCKS by now....Hind sights 20/20, So take everyone elses advice here to heart, when they try and explain a better route for you bud.

All the best luck in your endeavors in whatever field you end up sticking with. Time flies by fast, and before you know it, you will be OLD TOO hahahaha

Hey Harvest, you asked, "Is there a catch?" The "catch" is that to the uninitiated it sounds like you'd be making more money. Now that you've got a little more information, you did the math and figured it out. Good for you!

Being a rookie always has its struggles. One of them is the pay. Doing well in trucking is really dependent on the person behind the wheel. You've acknowledged your past mistakes and immaturity. Get started now with a solid company that has a large fleet and practice improving your net results. That's where the money lies. You have to be really productive. Remember when being paid for the level of work you do means you have to be getting a lot done.

There is a lot of complications to being productive, but the professionals out here conquer those things like foes and enemies. Just understanding how to drive the truck is a very small part of the formula for success at this. Put in some time and keep in touch with people like the drivers here in this forum. There's so much to learn until you start earning really good money. You can do it, I'm confident of that.

I've got a friend on my fleet who made fifty thousand dollars two years ago. I made twice that. We both have the same rate of pay. He started asking me for some advice. This past year he earned eighty thousand dollars. He just needed some help understanding things that help you get more and better loads. Nothing changed with his pay rate, yet by learning how to be more productive he increased his pay by thirty thousand dollars. He's still got room for improvement. Most of us do, but it takes resolve and commitment.

Yeah, it definitely sounds good before you look into it. After deducting everything, you would need almost double that for to be remotely worth it after expenses. And yeah, I was definitely immature still at 21. I feel like a completely different human. I started working IT from home after I was injured in a car accident. Moved out on my own for the first time and have real world experience. Getting that real life living on your own experience makes you take things a bit more seriously. I'll be honest, OTR will never be the life I want. But it will be a means to a end. I NEED that experience for me to get the hourly local position I want for my career.