All over but the accounting

| February 15, 2009

The end of the year is an important time for organizing your financial affairs, examining your business and determining what your tax bite will be.

By the time you read this, you’ll have less than a month to get your financial house in order or to continue the smart planning you’ve engaged in throughout the year and gather your records for tax preparation.

This year it’s been especially important to stay on top of your finances. Freight is down, business is tough and income is harder to come by. Every receipt you can find, every expense dollar you paid, will help reduce your tax bill. If this has been a good year despite all odds, you can use this month to search for ways to cut your taxes and get ready for next year, which might not be as profitable. If you have struggled this year and are considering your options, use this time to talk with your tax adviser to set up a plan to keep you going. You may be overlooking financial moves that could mean the difference between staying in business and not. Either way, you don’t have time to waste.

Financial affairs
Pull out your budget. Are you having the kind of year you budgeted for? Ask yourself why you didn’t make the money you thought you’d make, says Eric Cook, owner of Peak Trucking Consultants. Are your expenses higher than predicted? Frank answers to these questions will help you do a better job in 2009.

If you don’t follow a budget, now’s the time to start one, whether you’re an owner-operator or company driver. Sit down with your spouse or tax adviser or both and put together a budget for the coming year. It’ll take an hour or so to create one and an hour a month to update it, says Russell Fullingim, president of Truckers Financial Service. “Truckers have time to do this,” he says. “You can also go on the Internet and find programs that can help you.”

Mark Miller, tax manager at owner-operator business services firm ATBS, says there’s a correlation between keeping a budget and profit-and-loss statement and success as an owner-operator. “You put the work in, you put in the discipline, you’re more successful,” he says.

Owner-operators, if the road has been tough this year, gather all your paperwork and look at your profit-and-loss statement to see where you could make improvements. Cook says this is a time for hard questions: Why am I not generating more revenue? Are my expenses too high? An outside consultant might be able to help you identify the areas that will improve your business.

“You can look at your cash flow and decide what bills you can put off, which you need to pay now and which you can postpone until you get back on your feet,” Cook says. “You might look at a restructuring of your business, maybe talk with creditors like your credit-card company or see if you can refinance your house to go from an adjustable-rate mortgage to a fixed-rate mortgage. If you’ve been putting money in an escrow account and you’re struggling to make your house payment, that’s maybe something you can put off for a couple of months.”

You have to set priorities in your spending. Fullingim says he has clients who are in danger of losing their homes, and part of the problem is they are spending too much money in some other areas. One client in this predicament is spending more than $1,100 each month on two personal vehicles.

December is a good time to assess your retirement planning. Many truckers, especially owner-operators, aren’t putting anything aside for retirement. Others aren’t contributing the maximum to their retirement accounts, whether an individual retirement account or a 401(k). And many truckers are operating without health insurance for either themselves or their families. “They need to put money in a retirement plan and a medical plan,” Fullingim says.

He reminds owner-operators that you can set up a solo 401(k) in your business, setting aside a maximum of $50,000, depending on your age, which is tax-deferred. You can set up an account for your spouse if he or she is involved in the business. As with an IRA, you can make contributions to a 401(k) as late as next April 15, but the account must be established by the end of this year. You could open an account with, say, $500 and make additional contributions until April 15 for the 2008 tax year. If you’re already in a retirement account, contribute as much as you can afford.

“Looking to the future, when do you want to retire?” Fullingim asks. “You don’t want to be driving a truck when you’re 70 years old.”

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