Tax Tips
Estimations and employees

By Howard Abrams, PBS Tax & Bookkeeping

I'm planning on doing some equipment changes so I'm worried about how much available cash I will need. So far this year I have a nice profit so I'm also worried about how much taxes I might have to pay come next April. What do I have to do?

While you should always have an idea of your potential tax bill, this time of year is perfect for getting an income tax projection. You have nine months of operations to use as a guide to project your profit for the entire year and the related projected income taxes. In addition, you have about two months to do planning, and to alleviate any tax problems, if possible.

I hope you have paid your estimated tax vouchers that your accountant has prepared for you. What you need to do is to send your profit and loss statement through September, along with any transaction that may have occurred during the year that could affect your taxes, such as equipment purchases, sales, capital gains, or withdrawals from your retirement plans.

Your accountant will project your profit for the 12 months of 2015 and the related taxes, and then discuss potential problems, if any. Be sure to include any estimated tax payments you made.

Knowledge of your potential taxes is necessary to help plan for the near term. Decisions such as the equipment changes you want to make or whether to take time off to do that major truck overhaul or even to remodel your residence hinges on your financial situation, including potential income taxes.

OK. Unfortunately, I did not pay my estimated taxes so I will be sending the information my accountant needs immediately. I want to add a truck in the $90,000 range and possibly get rid of one. Am I in trouble?

You are not in trouble yet. You can ask your accountant to proceed and see what they come up with. For projection purposes, they can assume you will purchase equipment in the $90,000 range and run some scenarios from there. Your accountant can also compare your income and expenses for the past two years in order to spot anything unusual. It is not good that you did not pay estimated taxes because if you do owe, you will be paying penalties and interest that are costs you could avoid and that are not deductible.

If I hire a driver for my new truck, can I pay him or her as an independent contractor?

So many times we are asked how to pay a driver who works for an owner-operator. As you indicated, the usual preferred mode is to just cut them a check without payroll deductions, thus paying them as an independent contractor. Payroll taxes amount to approximately

10 percent of gross pay. If the gross pay of an employee on the payroll is $100, it will cost you $110, which includes the payroll taxes. On top of that, you will need to get workman's compensation insurance. That could range from 5 to 6 percent up to 15 or 20 percent. Then you need to have someone prepare the payroll tax reports.

The bottom line is that most employers in the trucking industry try to avoid payroll and pay their drivers as independents. We do not recommend doing that unless they are truly independent.

What are the implications of not putting my employee on payroll?

If their employment is terminated, they may file for unemployment insurance. If they prevail, you will be hit with back payroll taxes, penalties and interest for you, as well as the employee. If you want to avoid the payroll taxes and workers compensation insurance, hire true independent drivers who drive their own equipment. LL

This article has been presented by PBS Tax & Bookkeeping Service, a company which has been providing income tax and bookkeeping services to the trucking industry for over a quarter century. If you would like further information, please contact us at 800-697-5153. Visit our website at www.pbstax.com.

Everyone's financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.