Tax-reform Q&A: ATBS e-book, recent webinar on principle considerations for owner-ops

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Todd Amen, president of owner-operator business services firm ATBS, hosted a Wednesday webinar in which he ran through several of the highlights among changes made by recently passed tax reform legislation. Those included many of the high points covered in Overdrive via these recent stories — and a podcast — by news editor James Jaillet:

Amen also introduced an ebook ATBS has recently made available via its website called “The Owner-Operator’s Guide to the Tax Cuts and Jobs Act of 2017.”

The guide presents detail on answers to the following most-asked questions, which Amen ran down in the Wednesday presentation (you can listen to a replay via the video up top):

  • Will I be charged a penalty for not having health insurance? Yes, if you don’t carry health insurance this year. The requirement to have health insurance under the Affordable Care Act does not sunset until tax year 2019.  
  • Will I get a tax cut? Most owner-operators will, some company drivers will, some won’t. 
  • Is now the right time to incorporate my trucking business? The S Corp structure, which allows for a corporate structure but for business income to continue to pass through an owner-operator’s personal tax return, offers the greatest potential for tax savings, depending on how the owner-operator sets up his own compensation from the corporation. At once, deflating how much the S Corp pays for the owner-operator’s salary in an outsize way to avoid taxes could be a shortsighted strategy if you plan to rely in part on Social Security in retirement. If you plan to structure the business this way to minimize taxes as much as you can, consider banking the tax savings in a retirement investment vehicle. Amen advised that though tax savings potential is greatest in the S Corp structure, ATBS generally advises owner-operators on the added complication of doing payroll and deductions. “Weigh what you’ll save in taxes against what you’ll pay in other business expenses,” he said, before making any switch. The simple sole proprietor model is “probably best to start out” with, but “if you know you’re making better than average [income and the business is] well established, may want to establish an S Corp.” 
  • Is per diem going away? Not exactly — owner-operators can continue to figure per-diem as a line-item expense, though company drivers will not be able to individually claim it. Given the rise in standard deductions for filing individuals, couples and heads of household, though, it may not result in a tax rise for such drivers. (Some fleets will continue to or newly offer drivers pay packages that include non-taxed per-diem reimbursement pay as part of their per-mile rates, thus avoiding the employer’s portion of Medicare and Social Security employment taxes. Drivers considering these kinds of arrangements may be advised to consider the potential effect on Social Security payments at retirement down the line — the less put into Social Security on your behalf now, the less you’ll get from it later. One might always invest any new per-diem-pay windfall, should it materialize.) 
  • Is it time to buy a new truck or expand my fleet? Given the changes in depreciation and carrying losses forward indefinitely over multiple years, a new truck purchase could easily zero out tax liability for the average owner-operator (making around $60,000 in income) for two and some years. Expansion in a tight market could be further possible given supply/demand pressures driving up rates. Amen says the changes in depreciation and the near 15 percent C Corp tax windfall, among other cuts, is likely to lead uptick in economic activity. “What these taxes really mean is there’s going to be a boom in the economy,” he said. With depreciation changes, “there’s going to be a lot of people [and businesses] buying a lot of stuff.” 
  • How much is the new child tax credit? It’s double what it was previously. $1,400 of the now-current $2,000 deduction, furthermore, is refundable, meaning it reduces your tax directly, not your taxable income. 
  • Will alimony be a deductible expense? They will remain deductible as long as the separation agreement is signed or divorce proceeding concludes before the end of the year. Congress changed the rules to exclude such payments resulting from divorces after 2018 from possible deductions. “If you have something you have to deal with like that,” Amen said, “you’d be smart to take advantage of it before the end of the year.”…
The Business Manual for Owner-Operators
Overdrive editors and ATBS present the industry’s best manual for prospective and committed owner-operators. You’ll find exceptional depth on many issues in the 2021 edition of Partners in Business.
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