During this week’s episode of the Oakley Podcast, host Jeremy Kellett is joined by Jeff Amen and Michael Schneider to answer your tax questions, discuss the benefits of ATBS as your tax service, and more.
Key topics in today’s conversation include:
- About American Truck Business Services (3:33)
- Being a sole proprietor versus being an LLC or incorporated (12:16)
- Per diem: proof, changes (19:03)
- Home office IRS deductions (23:16)
- ATBS personal business consultant (27:18)
- Writing off health insurance (29:36)
- Deducting phone bills (31:00)
- How to know you’re paying into Social Security (33:09)
- Child tax credits (34:53)
- COVID sick and family leave credit (37:42)
- If you need to take more deductions (41:56)
- Partial day per diem (43:30)
If you have more questions, go to ATBS.com for more information.
Oakley Trucking is a family-owned and operated trucking company headquartered in North Little Rock, Arkansas. For more information, check out our show website: podcast.bruceoakley.com.
Jeff Amen 0:12
I always say no owner-operator became an owner-operator because they had this burning desire to do their own bookkeeping and taxes. That’s the necessary evil that goes along with owning your own business, having to do a lot of your bookkeeping, accounting, and tax work. Our business is about taking that burden off of our client’s shoulders and doing all that work for them so they can do what they truly love doing, which is driving those trucks.
Jeremy Kellett 0:32
Welcome to the Oakley podcast, trucking, business, and family. This show is brought to you by Oakley Trucking, headquartered in North Little Rock, Arkansas. The purpose of this podcast is to communicate with Oakley owner-operators and their families by giving them up-to-date information concerning Oakley Trucking and the trucking industry. From business advice to safety updates to success stories. Also to give an inside to outside truck drivers that might be interested in joining the Oakley family.
Hi, this is Jeremy Kellett, Director of Recruiting here at Oakley Trucking. I’m your host for this podcast. This is episode 98. This podcast was created to help Oakley owner-operators and their families be more informed about what’s going on at Oakley Trucking so we can communicate better with you so you will be more successful. And guess what? If you’re more successful, Oakley Trucking is more successful. So we created this podcast and we hope it helps all Oakley owner-operators do better in their job and learn things every week that we do it.
I’m joined today by Jeff Amen and Michael Schneider of ATBS, a tax accounting firm for truck drivers, and they’re going to answer some questions that our owner-operators have been asking. We’re also going to discuss the benefits of ATBS as your tax service. We offer ATBS here at Oakley trucking as a settlement deduct for our owner-operators. And it’s a great service that we offer for them. And I always like to get these guys on, try to do it every year, and they were gracious enough to do it last year, and kind of get the podcast kicked off, too. Help us a whole lot. I know things have changed, but they did episode 47—if you want to go back and watch that one—last year. That was a really good episode and ask a lot of questions. But this one right here is going to be even better because I actually sent out an email to our owner-operators seeing if they had any questions and to shoot them back to me, and they did. I was overwhelmed. I only did it yesterday, so in less than 24 hours they’ve shot me back a lot of questions, which I’m going to hit you guys with. So I appreciate you guys joining me and doing this podcast and helping our owner-operators know more about taxes because it’s the thing that can be very confusing when it comes to being an independent contractor.
If you guys will, I’ll let you start on your end, maybe introducing yourselves and ATBS, and then we want to dive right into some of these questions. And I know I sent you some and you guys sent me some, too. If we don’t get through all of them, that’s fine with me, but we can get to some of them and what you think also is important to communicate to the truck drivers right now.
Jeff Amen 3:16
That sounds great, Jeremy. Thanks for having us on the podcast. We love it. We love the opportunity and appreciate it. I’m Jeff Amen. Beside me is Michael Schneider, as you said. Michael runs our tax department at ATBS. I’ll give you a quick background on ATBS.
I’ve got two brothers and the three of us own ATBS. My two brothers and I we started in trucking when we were 12 years old as diesel mechanics. And we spend our entire lives in trucking. By time I said we started were 12 diesel mechanics. By the time we got out of college, we had done just about every job you can do in trucking. And after college, we own our own trucking companies. We had an LTL company with about 150 trucks. We had a truckload operation with about 600 trucks. And we had our logistics and brokerage operations. And you know, you said something right beginning, Jeremy that you do these podcasts to try and help your contractors be more successful because the more successful they are, the more successful Oakley is. And that insight is unbelievable. It’s something that a lot of people don’t understand about owner operators AND, and so I can tell you the reason HBs exists. It’s because of that exact comment you made and I’ll elaborate on that a little bit. When we own our trucking companies. My two brothers night. We came in into work one day, we sat around a conference table and looked each other. We said this place sucks. Our employees hated us and we hated them. Our truck drivers hated and we hated them. It’s no fun to come to work, the culture was awful. And we looked at each other and said why why is the culture like this? Why do we hate all our drivers? What are all of our drivers hate us and What we came to the realization of is that we at that time we were 100%. company drivers, no owner operators. You guys are 100% owner-operator, right, Jeremy?
Jeremy Kellett 5:10
Jeff Amen 5:11
I want to double check that. I knew that was the case, but I wanted to double check before I make these comments. They’ll piss off some company deal. When we were looking around the table and said, Why is our culture so bad? And and why do we have this awful relationship with our drivers? This is the deal in trucking, the market sets the rates, there’s, you know, the largest trucking companies in the world control less than 1% of the marketplace. So you know, you can, as an individual trucking company, we couldn’t go out and charge more for what we did. Because there’s 1000 companies behind us, that would do it for a lower rate. So if the market is setting the rates, and we can’t charge more for what we do than anybody else is charging, then for us to generate more profit, which every owner of a business wants to generate as much profit as possible. If you can’t generate more profit by by generating more top line revenue, the only way to generate more profit is cut your costs. And you’ve got employee drivers, your single biggest cost is labor. And so the biggest opportunity to cut costs is to reduce your labor cost that your truck drivers. And so for us as owners to make more money, we had to figure out how to make our people work harder, and how to pay him less for what they did. And so it was it was a win lose for us as owners to make more money. Like I said, we had to figure out how to make everybody work harder and how to pay him less for the work they did. And so it’s just it was this awful, negative culture. And we said how are we going to change the culture in our business. And for us, it came down to owner operator, we started effectively, the first lease purchase program in the country and turn our employees into owner operators, we passed everything on at our cost, there were no markup for anything. And in our employee drivers became owner operators. And they completely changed the culture of our company. Because as you know, as you stated, with owner operators, essentially, the company is getting a percentage of their take. And so the more successful your owner operators are, the more money they make, the more money you make. And so your culture goes from beating people up to lifting people up, it’s a win win. So the operators are more successful, the company isn’t. And so literally, we change, we convert our fleet to 100% owner operators, change the culture of the business, our owner operators are killing it. And eventually, we had opportunity to sell our trucking companies, to carriers that wanted our model for running owner operators. And we sold them and literally the day we sold our last trucking company, we started ATBS, the exact same day we sold our last trucking company. So ATBS his sole reason for being to help our owner-operator clients make as much money as they can possibly make it to give as absolutely little of that money as possible to the IRS, minimize their tax burden, keep it in their pocket, help them be successful.
That’s the down and dirty. I could spend hours telling that story, but that’s the down and dirty of who ATBS is, what our background is. The way I would describe ATBS to anybody listening is our goal is to be the back office for our independent contractor clients or operator clients, they they drive the truck and maximize what they’re doing running their business. And we’re the back office managing everything. You know, I always say no owner operator became an owner operator because they had this burning desire to do their own bookkeeping attacks, right? That’s the necessary evil that goes along with owning your own business is having to do all of your bookkeeping, accounting and tax work. So for us, our business is about taking that burden off of our clients shoulders, and doing all that work for them. So they do what they truly love doing which is driving those trucks.
Jeremy Kellett 8:45
How many clients do you all have, Jeff?
Jeff Amen 8:48
That’s an unbelievable question. And I can’t even give you an exact number and all the things we do we work with over 75,000 Owner Operator clients. And yeah, it’s a huge number and statistic that I think it’s unbelievable. A couple statistics we we bring on on average for the last year, we bring on a little over 1000 new clients, new owner operators a month join our service, which is a huge number of 1000 new owner operators a month coming on board. And even with like last month I just looked at on Monday, last month, we brought on 1070 Something new clients, even with 1000 new clients joining our service a month our average client has been with HTTPS for almost four years. So even with me new clients, or have still been with us for years, which we’re really proud of.
Jeremy Kellett 9:39
Well, you should be. That’s an amazing number. I have no idea that many will be coming on every month. That’s a load for you guys. Michael’s gonna have to do a little OT.
Jeff Amen 9:50
This time of year Michael’s department is overwhelmed. It’s incredible. I’ll tell you a couple other things that I think are amazing. One is specifically to to Oakley show when people benchmark ATBS clients versus owner operators that don’t use ATBS, our average client earns 40% higher profits than an owner operator that doesn’t use ATPs. I think I mentioned that earlier, they paid 1000s less in taxes. But here’s something I just looked up literally minutes. Before walking into this room we work we have the largest database in the world on owner operator performance across the country. Our average owner operator last year, Jeremy made $71,000. Like I said, we’re going through these numbers right now. We publish the statistics for the entire industry. Our average owner operator made $71,000 last year. The statistics are unbelievable. Our average Oakley client last year— Guess what they made.
Jeremy Kellett 10:49
Jeff Amen 10:50
Jeremy Kellett 10:53
Jeff Amen 10:54
$50,000 more than the industry that our average Oakley client made. Is that unbelievable?
Jeremy Kellett 11:02
That’s unbelievable. And that’s good information for our guys to hear. Because you know, right now they that’s that carrots out there, you know, dangling of money here, money there, y’all come over here. So it’s real tempting for guys to chase that dollar right now, when it’s really, it’s not as good as it looks sometimes. And if you just stay at home, you can reap the benefits at Oakley.
Let’s get into some of these questions from our listeners that we could knock out pretty quick if you don’t care. One that kept coming up that I know can be a whole podcast in itself, but y’all try to do your best to limit the simplest way of being a sole proprietor versus being an LLC or incorporated, and maybe a couple of pros and cons for listeners.
Jeff Amen 11:54
Yeah. So again, I’m Jeff and I’m doing a lot of talking right now, but Michael is the one who knows a lot of this stuff. I answer the easy stuff and when it gets tough, Michael’s the one that has all the answers. I’ll just tell you, from my perspective, sole proprietor versus S corp, LLC, those things.
First off, let me just say, we’re an accounting and tax company. So legally, we’re not allowed to give legal advice. But I personally advice and say that all the companies I own, I own several businesses, they’re all policies. And the reason I like LLC is because they have the legal protection of a corporation. So that’s one of the first and primary benefits of being an LLC, or an S Corp is legal protection, because you as an individual are separate from your business. But beyond that, I think taxes are, are probably the single most significant issue in determining whether or not to be a sole proprietor. And so I’m going to describe like, as I get the weeds, and it would take, as you said, a day to do to get through all this, I’m going to try to describe a very high level, the difference between a sole proprietor and an S corp. So as a sole proprietor, when it comes to taxes, essentially, you pay self employment tax on all of the profits of your business. And thanks that might get in the weeds and get into really specifics, I’m just a big picture. Just think of it as a sole proprietor you pay for you pay self employment tax on all the profits of your business. If you’re a Sub S Corporation, we turn you into an employee of your corporation. And once you’re an employee of your corporation, you’re only paying FICA tax on the on the salary, you pay yourself out of your business. So instead of paying self employment tax and all the profit of the company, you’re paying FICA tax on the salary you pay yourself, it says little more complex than that, but that’s really the tax consequences. And so when I when I think of that, when we analyze our clients, we see somewhere around 68 to $70,000, net income or higher, we can save you a whole bunch of money on taxes by filing your taxes as an escort. Because again, instead of paying self employment tax and all the profit, you’re only paying FICA tax on the salary and pay yourself and, by the way, we’ll do all this.
Jeremy Kellett 14:17
On that, you just pay taxes on what you pay yourself if you’re an escort. Well, what about the remainder of the money? So I made 150,000 or $120,000 and I paid myself $75,000. That other 75 that’s in the escort, how’s that taxed?
Jeff Amen 14:40
The profit of the business are essentially taxed the same, whether you’re a sole proprietor or an escort, you’ve got to pay income tax on the profit you make. And and so, you know, just because you pay yourself a salary out of your business, we pay FICA tax on that, but you’re still paying net income tax, you’re paying income tax on the profit of the business in both scenarios. So there’s there’s not a big difference in the income tax, the difference is in that self employment versus FICA tax. And again, instead of self employment being on all the profit of the business, the equivalent of self employment FICA, in the self employment in the, in the corporation, you’re only paying FICA tax on the salary. Now, there’s a couple things about that, that I should say, first off, it’s a lot more work to do taxes as an escort you, like I said, we make you an employee of your corporation. Let me say, first off, we can do all this work for you. We do all this work for our clients.
Jeremy Kellett 15:39
Oh, okay. That’s what I was gonna ask. Y’all take care of all that.
Jeff Amen 15:42
You get your payroll, we’ll file your payroll taxes with Secretary of State, we’ll keep your corporation current. So we do all that. And then you have to do corporate tax returns, in addition to your personal tax returns, we’ll do your corporate returns, we’ll do your personal return, we’ll do all that. It’s gonna cost you a little more money, because we have to do all that extra work. And so we always do the analysis. And it’s always the clients choice, we do the analysis and say, We file your taxes and escort here’s how much we can save you. Here’s how much more it’ll cost you the net difference, you know, we’ll save you $5,000, or $8,000, or $10,000, or $20,000, whatever the number is, here’s how much we can save you. Do you want us to do it this way. And it’s always the clients choice. But again, we do all the work, they don’t have to do extra work, we’ll do the work for them. The second thing I’ll say is people ask us all the time, should I be sole proprietor? Should I be an LLC? Should I be an S corp should be a C Corp. First thing I would say is do not be a C Corp period, period period. And if somebody talked you into that, call us we can unwind it immediately. And that’s that’s because essentially, a C Corp has what’s called double taxation to pay all the taxes on the business. Now you distribute the money yourself, you pay all the taxes again, on everything, you distribute yourself. So double taxation and C Corp is awful reason to be a C Corp is if you plan on going public, otherwise, is that your otherwise it doesn’t make sense. S Corp is the kind of taxes, I think makes the most sense. But I can just tell you, personally, we recommend 95% of the time to be an LLC, and not an escort. And the reason is, if you become an LLC now, as an LLC, you can elect whether to so so as I mentioned before, an LLC gives you legal protection, like like as if you’re an escort. But as an LLC, you can elect to file your taxes either as a sole proprietor or as an escort. So So you have the choices now I’ll see how to file your taxes. And so if you’re an LLC, and we say we can save you a bunch of money by filing your taxes an S corp, do you want to do it, you say yes, all we do is elect with your LLC to file taxes as an escort instead of a sole proprietor. So LLC is kind of the best of both worlds, you can be an LLC, in a lot of file taxes, either as a sole proprietor or as an escort.
Jeremy Kellett 17:57
Good info, man. That’s good stuff. I didn’t realize y’all did all that, too, so that makes it a one stop shop for everybody.
Jeff Amen 18:03
We do. So maybe, to add to that, just when you say in relation to all that stuff, we work with clients with 20 or less trucks. We’ve got one with 21 trucks, but in general, 20 or less trucks, we can handle everything for them, do their payroll for other owner operator for all their drivers. If they’ve got drivers or operators running forum, we do their 1099, we do all of that.
Jeremy Kellett 18:25
Oh, man, that is good to know. Because occasionally we run into that in this past week, a guy wanting to drive for somebody, and he didn’t know how to pay so we can refer him to you. Okay, good stuff. That sounds good. Looks like they can always get in touch with you to find out more information on all these questions, which of course, they can. Everybody go to ATBS.com and check all this stuff out.
Let’s get into some more of this. Allison asked, do they need a copy of their logs to prove this per diem? And then go ahead and tell us about the per diem changes.
Michael Schneider 19:01
I’ll just talk about the per diem. The IRS will commonly go to the E logs, as they are now. They used to be paper logs but now their E logs. They’ll go to that for proof of your per diem days. So ideally, yes. You want to have your E logs as often as possible. Is it the end all be all the Bible of the tax deduction? No. So let’s say you lost your logs, you didn’t get your logs, whatever the case may be. There’s lots of other ways to prove that you’re away from home. So you can use your settlements. You can use your travel miles, you know, they took a load all over the country. Obviously, you’re away from home. So there’s other ways to prove that then your logs but yeah, if you’re going to use the ace up your sleeve, it’s your logbooks. If you don’t have the ACS, the key, that’s your settlement. You know, go on down the list and prove it the best way you can. That’s when IRS is gonna go out. Per Diem changes. There are a couple that we want to go over so the rate went up this last year. Most drivers probably know that by now that changed was October 1 of 2021. The rate went from $66 a day to $69 a day. So definitely want to keep your logs keep your per diem records and make sure your tax accountant is taking care of those for you. The bigger and more significant change this year is the restaurant 100% meal deduction rule that is in place for 2021 and 2022. So what the IRS came out and said, and we did a lot of research on this, I actually called the author of the tax code to ask them these questions about truckers, because just as Canada tax laws written in general, they didn’t keep trekkers in mind when they did it. So I called them up and said, Hey, what about per diem? Is that Well, we haven’t thought about that. So we talked through it made a decision. And they came back six months later, and IRS announced that the per diem is 100% deductible for 2021 and 2022. So that is huge. If your old tax repairs trying to use 80%. That is incorrect for 2021 and 2022. That’s for drivers to take 100% Per Diem deduction. And we were kind of on the forefront of arguing with the IRS and fighting about that. So that was interesting to talk with those agents over there that writing code, but—
Jeff Amen 21:18
Michael’s not giving himself enough credit. I can tell you that. This was part of the last stimulus bill, and through stimulus, Congress decided they wanted to stimulate restaurants to be successful. Try and bring them back and save them. And so for that, they said, business meal deduction is going to be 100%. And as great you know, for you and me, Jeremy, if we go out to lunch, we can deduct 100% of it. But for our private clients, a business meal deduction is irrelevant, because they’re taking per diem. They’re not deducting individual meals. So like, it’s like Michael said, he went directly to council of the IRS and said, hey, you know, our truck driver clients are getting screwed over because they take per diem, they don’t take a business meal deduction. And he spent a lot of time working with the IRS. We made the decision Per Diem was 100% deductible. And like Michael said, after working with Chief Counsel, the IRS, but he came out in six months later and announced that they were formalizing what Michael had worked out with them.
Jeremy Kellett 22:14
And that’s for last year and this year.
Michael Schneider 22:17
Correct, yep. So taxes you’re doing right now for last year, and next year’s taxes. Yep.
Jeremy Kellett 22:23
That can be a significant amount of money.
Michael Schneider 22:26
Jeff Amen 22:27
It is a significant amount of money. And the other thing Michael mentioned, I just want to reiterate something is the pretty embracing change in October, very few tax people out there are going to waste their time trying to figure out the new rate for the last quarter of last year, they’re going to wait until 2022. And then we’re going to take the new rate, we don’t do it that way. The second the per diem rate changed, we changed it for our clients. So if you’re not using ATBS, whoever you’re using, make sure to educate them that this brain rate change in October, and I want credit for it last year, not just 2022.
Jeremy Kellett 23:03
Yeah. Great information. So that’s good. I was looking at the next topic here of your notes, and you got “home office.” Explain what you mean by a home office?
Michael Schneider 23:15
Yep, so home office, a couple of things to mention there, I want to start with the simplified method. This came out a few years back, it’s been probably longer than that. But that’s that’s where my memory goes. So we’ve got $5 per square foot up to 300 square feet. That’s called the simplified method, and you get $1,500 induction on your return. If your office is in 300 square feet, well measure whatever it is and take $5 per square foot for that office. That is the best method to use. You don’t you’re not going to complicate your taxes. By doing a percentage of utilities and your mortgage payment and your interest. You don’t have to mess with all that math $5 per square foot. The secondary thing that I like to talk with our drivers about home office related is, I’m in my truck, I’m not allowed to take a home office. IRS continues to remind us that even if your principal place of business is not your home, you can still take a home office deduction if you regularly and exclusively use a home office for your business. So that can be storage that can be placed where you do your bookkeeping and accounting and tax work whatever you keep your materials and work with your accountant to send that stuff that’s regular and exclusive use and that can be a home office. Now a couple things you want to watch out for: you don’t want a bed in your home office. You don’t want to be using a bedroom or a kitchen. You do want this place to look like an office, feel like an office, be exclusively used as an office.
Jeremy Kellett 24:45
That’s a good point. It’s got to look the part that it’s playing. I had another guy ask me kinda on that line, John Haley, he said, what about if he uses his pickup at home? Is there any of that mileage gas pick up, can he claim any of that?
Michael Schneider 25:04
Absolutely. There’s another great simplified method, and the IRS is moving a little bit this direction to simplify some of these things. But rather than taking your fuel, your maintenance your insurance and adding all that up and doing a percentage, there’s another simple method to use 2021 is 56 cents a mile. So that’s that’s what you get tracked your business miles, tell your accountant, multiply it by 56 cents a mile, and you’re good to go. That’s your tax deduction, this year 2022. That’s like the 58 and a half cents. So we’ve all seen fuel increases price increases inflation and whatnot, that is attributable the IRS has recognized that and increase their rate from 56 cents to 58 and a half cents, track those every year, submit those to your accountant, it’s absolutely a deduction.
Jeff Amen 25:51
And it’s a great question because that’s one that so many accounts missed one that so many drivers don’t get taken advantage of we specifically asked that question, they don’t think a lot of drivers don’t think in terms of you know, picture them or a spouse going to Walmart and they buy Windex, they clean the windshield with some other stuff for the house. Just because they bought some stuff for the house. As long as they did buy some for the truck. They can write off all the miles on that trip that they got groceries or whatever. So yeah, there’s one thing I’ll just say is that, and that’s a perfect example whether it’s miles personal miles in a vehicle, I mean, that miles on a personal vehicle, whether it’s the home office deduction, we’re ATBS is I mentioned we save our clients 1,000s of dollars of tax, we are super aggressive on deduction, we do not cheat period, will not do not have never cheated. But we’re aggressive on deductions. Michael and his team are working all day every day with the IRS trying to figure out I mean, we deduct things like sunglasses as a safety device, guard dogs, I mean, we don’t care if you’ve got a chihuahua on the truck, as long as long as that dog can bark and function as an alarm, we’re going to take a guard dog deduction, you can write off vet bills, you can write off pet food. Just some of the unique things we do it very few people who don’t understand owner operators.
Jeremy Kellett 27:17
And so the person that is assigned to the driver to educate him, they educate him on these different things. It’s not up to him to find out all these rules. That’s what he’s paying you for.
Jeff Amen 27:32
That’s exactly right. So what you’re mentioning is every one of our clients has a personal business consultant that works with them. We give three of every client a list of all the types of things that they can be deducting. And then we’re watching for stuff that they’re not sending us. And if we’re not getting certain types of expenses, we reach out to him and say, Hey, you’d be writing this stuff off, send it to us, so that we can take the deduction for you. And then at the end of the year, when we’re doing their tax return, we literally for our clients, every line item on a tax return, we estimate where they should be in terms of numbers. And if we see some where they fall outside that statistical bell curve, or we think they should be, we reach out to them and we say hey, you know, we don’t we think your truck cost more than four cents a mile and maintenance, we’re missing the maintenance expenses. Let’s go get them so we can write them off. We think you’re missing fuel from the third week of August. Let’s go get it so we can write it off. And, you know, a statistic that I think is unbelievable, Jeremy is that, you know, I I arrogantly believe our clients are the most sophisticated owner operators in the country. When we do taxes for our clients every year. For the 24 years, we’ve been doing this. Every year 92% of our clients, we find stuff they forgot to send us, we go out and get it and we take additional deductions. And what that means is they’re going somewhere else to get their taxes done, then 2% of our clients will be paying too much taxes because it’s the stuff that somebody else, you go anywhere else handle or stuff your stuff they put in a computer program and give you back a tax return. You did all the work, we we do all the work, we put it in and then we look for what you might be missing. And we reach out and say hey, you’ve got a kid in college we’ve been taking these kinds of deductions, a census stuff so we can write it off. As you said, we get in the weeds and we reach out and tell him what we’re not getting that we could be taking for deductions we don’t just depend on them to send us what they think we can be deducting.
Jeremy Kellett 29:25
I had David Bird ask me about health insurance. Can you write off health insurance?
Michael Schneider 29:30
Absolutely. So this one can be a little tricky so we’ll we’ll dive into it as simply as we can. If you’re single meaning you’re not married, and you don’t have an employee w two job or business owner operator full time. Absolutely. Yes, you can take your health insurance as the deduction. So what that means is the the IRS is trying to push people toward employer plans w two plans. So let’s go into the married filing joint tax payer. You’re married your spouse has a W two job and they offer Family Health Insurance. If you’re self employed, health insurance is not deductible because you chose to choose that plan over your spouse’s employer plan. Even if it’s a choice, you’re not allowed to deduct it. But if your spouse does not have health insurance or wherever they work does not offer health insurance then again, absolutely, or self employed health insurance as a deduction. Sounds a little tricky when you’re married. But yes, generally you’re self employed, health insurance is deductible.
Jeremy Kellett 30:28
That’s a big obstacle for independent contractors, because a lot of them don’t have a source to get health insurance. I think this might help them knowing that, that it can be a wright off. If they don’t have a choice. And most of a lot of guys here, the wives stay at home and they don’t have a job and they don’t have that choice for health insurance. And so that’s something good to know right there for sure.
Let’s see on, the real quick, had one ask about cell phone, phone line. You know, you got three phones on your cell phone bill, how do you determine how much of that to deduct?
Michael Schneider 31:07
I’m gonna make this real easy for everybody. You’re gonna deduct the full thing.
Jeremy Kellett 31:14
Michael Schneider 31:16
IRS pivoted a long time ago. This is what people forget. They get in their routine, they get in there rut, and they just keep preparing tax returns like they always have and sometimes you have to be wary of those tax accountants CPAs have been doing it for 30 years, because maybe they’re doing it under the rules over 30 years old. So the IRS and actually 2011 updated their guidance on cell phones from exclusive business use to primarily used for business purposes. So the way you and I defined primarily, that’s up to interpretation. I say 51% is primarily so if you’re using your cell phone primarily for business, you get to deduct the whole thing.
Jeremy Kellett 31:53
Let’s take a quick break and hear from our sponsor Arrow Truck Sales.
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Okay, here’s a good one. I had two people ask me this one. Anthony and Brent asked me about, when you pay your taxes, does that include your Social Security? I had one guy ask me, how do I know I’m paying into Social Security? Isn’t that when you pay your taxes?
Michael Schneider 33:14
Yep, absolutely. That’s a great question. So kind of going back to just comments about an S corporation being an employee. And I’ll just say this, generally, when you’re an employee, your employer takes that for you out of your paycheck, they send it to the appropriate agency, and you’re good to go. When you’re self employed. That’s why people are so surprised when they owe more taxes than they think they should. You’re paying the Social Security and Medicare at the end of the year when your tax return is filed. That’s what the Social Security Medicare tax is. That’s self employment tax. So that’s the 15.3%. We talked to these guys about, you’re paying your income tax that whatever bracket that’s at, and you’re paying this 15.3% self employment tax, and you bring self employment tax apart what it actually is Social Security Medicare,
Jeremy Kellett 34:01
Got it. Mmm. I know they’re gonna get it some way or another. You know what my plan was, Jeff and Michael? My plan was I get to determine where my taxes go. So you give me a list, and I get to select, I want to put so much to military, I want to put so much to wherever, you know, I get to choose where my taxes go. Isn’t that a great idea?
Jeff Amen 34:28
I like your plan. When are you going to run for Congress?
Jeremy Kellett 34:32
Never. Okay, let’s see. Also on the new credit. I had two questions, or two people asked me the same question about the child tax credit from last year and how it effects next year. Can you elaborate on that?
Michael Schneider 34:49
That’s a big one. I’m gonna back up one second, just to cover this before I forget it. The stimulus check was new this year. That was spring of 2021. That was the $1,400 check. So watch out for kids that were born in 2021. If you got anybody out there that had kids in 2021, they qualify for that $1,400 stimulus check, so make sure they’re getting that. Moving on to that. You just talked about child tax credit that has been enhanced by the current administration from 2000. To 3600. If you’re under age six, it’s only 3000 If you’re between ages six, and 17. So those are the two numbers to remember, got kids under six years old, you’re getting $3,600, this year for that child tax credit. If you get kids between six and 17, you’re getting $3,000 this year for each kid. So the the complicated piece, of course, that’s the simple part of it, the complicated pieces, they started in July paying this out monthly, but they decided they’re only going to pay half of the credit out for 2021, you’re going to claim the other half when you file your tax return. So that’s what these folks are asking about the the credit that was coming out July to December was a monthly credit, you might have been getting $300 a month, you might have been getting $250 a month that depends on their kids ages and how many kids you have. And then at the end of the year, when you go file that tax return, you’re going to claim the difference. So you’re going to tell the IRS, this is how much you gave me last year, I want to claim the difference and claim that let’s say 1800 or 1500, whatever that that may be for your family.
Jeremy Kellett 36:30
So remember, if you’re listening to this podcast, you can rewind this and listen to that again, because I would have to. I would have to back it up and just slow Michael down and listen to that again. But that is great, that’s great information for our people to know for our owner operators and all truck drivers out there. To understand how that works. This tax thing can be confusing to a lot of people. Why in the world somebody wouldn’t just pay you guys to do it, I have no idea because it sounds like you got it all together and understand it. So I would definitely look into that. Do we have a couple other things that we wanted to hit?
Michael Schneider 37:10
There’s another credit I want to touch on, and you might see me go back and forth between deductions and credits. So deductions, they reduce your taxable income, those are great. They’re generally business deductions. Credits are an entirely new animal. Credits reduce your taxes dollar for dollar. They’re fantastic. So the credits are the ones to go get if you can get them. So we’re talking stimulus check is a credit, Child Tax Credit, that’s a credit. Here’s a third one for you. That’s the COVID a sick and family leave credit. This credit is was passed, as you may know, or may heard on the news that if you’re an employee, and you got sick, right, your company had to pay sick time. And all the people there were self employed, said, Well, what about us, you know, we’re getting COVID out here, too, we’re having to care for family members that are getting COVID. And I’m missing work, but I’m self employed, there is a credit available for you to claim on your tax return, if that happens to you. So again, I’ll cover those quickly. The first period is January one to march 31. And that credit is a carryover from 2020. So we’re going all the way back to 2020. If you had COVID. And you claim this credit in 2020. You’re done you can’t claim the January to March credit and 2021. That however they reset it as we had all these surges and you know COVID shutdowns and things were going through again in 2021. They reset that on April 1. So if you had COVID, between April 1, or September 30, that benefit that credit is reset. So you can claim that credit again, again, it’s personal, if you miss time, because you had COVID You can claim 10 days, $511 per day. So you’re talking about $5,110 credit on your tax return, if you miss 10 days work. Now that’s based on how much you earn. So it’s not five elevens the max, they’re going to use your net income, what you earn basic day you missed, right, they’re going to use that calculation with a maximum of 511. The other one is you miss work because you have to care for a family member. So we’re talking about spouse, kids, parents, people who live with you, and you care for if you miss work to take care of them because it COVID That’s up to 60 days, and it’s $200 a day. So you’re talking about $12,000 credit, potentially if you had to miss work for COVID.
Jeremy Kellett 39:38
How are they gonna make us prove that, Michael?
Michael Schneider 39:41
That’s a great question, and that’s why Jeff talks about being aggressive. Keep your notes but they’ve got to come check us right if they if they want to take the time to come audit that then that they’re going to have to figure out what they want to audit but this is a self attestation if you will, I know that’s a that’s a tough word even for me to say But the the idea is you’re, you’re stating that based on your own facts and what you have, you know, do you have a doctor’s note? Do you have some symptoms? Did you take a test? You know, there’s all sorts of ways to prove you. You miss work because of COVID.
Jeremy Kellett 40:13
Yeah. Yeah, which is probably unlikely you’ll have to do it, but just in case. I think that keeping notes is critical when you’re doing something like that, but that’s great. I bet a lot of our owner operators don’t know anything about that. That’s a good information for them to understand. Let’s check in with our sponsor LubeZone.
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Well that’s answered all the questions I had from our listeners. Did you guys have anything else you wanted to touch on?
Jeff Amen 41:45
I’ll mentioned— Michael, did you have anything else?
Michael Schneider 41:48
I just have one item. I get this question a lot. I don’t know if you guys are thinking this as you’re listening to the podcast, but I get a lot of people say, yeah, I know all that. What else can I do? I’ve used all my deductions and taken all my credits, I still owe too much. I need to take more deductions. The advice I have for those folks is what are you doing with your retirement accounts? If you have health insurance? Do you have a health savings account? If you don’t go get one, you can put $7,200 As a family into a health savings account. You keep your money and you get a tax deduction. That’s a great way to get a tax deduction and save for the future. If you don’t have a retirement account, go get one. You’ve got IRAs 401 K’s there’s tremendous savings opportunity. And when you put money into those accounts, you keep your money and you get a tax deduction.
Jeremy Kellett 42:41
It basically just comes off the gross off the taxable income, right? Yep, you got it? Yeah. Yeah, that’s so good. I know there are, I want to say I had a financial guy, come on one of the podcasts with me and talk about a little bit of that stuff. But I know there’s a maximum if you reach so much money, but I shouldn’t I shouldn’t run into any of that since you know if they’re doing things rotten, but I don’t know, they’re making a lot of money this year so they may run into some of those rules that they made too much money to take this off. But I didn’t know about the health savings account, 7200. That’s a great help. They could put that in there. That’s for them if they have issues, I guess, you know, have health problems, they can use it.
Jeff Amen 43:26
I was going to mention real quick, Michael was talking about per diem. One thing we didn’t mention, one thing we do that I don’t know another accounting or tax from another country that does it is we do partial day per diem, not just whole day per diem. So if there was a rule on that, Michael?
Michael Schneider 43:43
It’s still 100%, but it’s 75% of 100%. That’s a tough way to do it, but 75% is $69, or whatever that math is.
Jeff Amen 43:53
So I think it is that we don’t say you have to be away from home the entire day, in order to get your per diem that day, you can do a partial day per diem. And so with that, two things I’ll mention, one thing I’ll mention is we have an ATS app for the folks that are clients know about our app for those that don’t, when I say our you know, our whole objective as a company, is to make our clients lives as simple as possible. If you get any piece of paper that you think has nothing to do with your business, you just send it to us and we deal with it. You can send us a two foot long Walmart receipt, and you can circle what you think’s deductible, but we got through it. And if we see some deductible, we take that deduction. And when I say get us every piece of paper that has something to do with your business, with our app, you literally you open up the ATBS app on your phone, you take a picture and at that point, you never have to touch it again. That plan just digitally and you’re done. So the entire extent of your bookkeeping is to open up the app, take a picture of that piece of paper, and like I said, your bookkeeping is done. You never have to That’s 100% of the extent of doing the bookkeeping for your business, just take a picture and you’re done with it. It’s our system. And we do everything from there on. So, you know, you go to a truckstop. And you come out with a receipt, instead of, you know, sorting and categorizing, and totaling yourself and trying to figure everything out, you don’t do anything. I mean, you come out of the receipt, you take a picture of it, and you’re done with it, you throw them, because we’ve got for that. The other thing that the reason I brought up the app is because in our app, we have a per diem tracker. So that for our clients, it makes it makes tracking per diem, super simple, you know, you know, we don’t we don’t track it by GPS, for obvious reasons, the clients don’t want to be tracked, and no one’s ever been tracked by GPS. So we let you track per diem in our app. So when you go in the app, you just click on per diem, and you just if you’re if you’ve got a day out on the road, or partially on the road, you click call day or partial day, and you’re done. Once a day, you go in and click, and you’re done for that day. And then our per diem tracker shows you what your year to date per diem is how much per diem you’ve captured, for your expense, up until that current point. So like I said, don’t get the weeds any of this, but it’s super, super neat to the app, or clients absolutely love it. It makes your life. So simple. Makes per diem tracking. So simple. And then the other thing you mentioned is, you said, I don’t know why you wouldn’t pay a TBS to do this work for you. And so I’ll just mention in terms of pay two things. First off, we give our own clients 23% Discount over what we charge, our typical client. And so that discount your ROP clients pay us roughly $23 a week to do everything I taught everything we do. We do budgeting, we do bookkeeping, we do all of your accounting, we do monthly profit loss statements where we benchmark you against 1000s of owner operators to show you where you’re doing good or where you need to make changes to make more money. We do quarterly tax estimates, we do your end state and federal tax returns. We do all of that work for that $23 a week. And it’s the price of a couple cups of coffee a week, right. And this is the thing that’s important to know, every dime you pay us is tax deductible. So $23 a week is a business expense for them, they don’t have to pay taxes on it. And then from a tax perspective, the last thing I want to say is, this is about quarterly estimated taxes to what every tax company in the country does is what’s called Safe Harbor taxes and what’s called Safe Harbor taxes. But what that means is you essentially take last year’s tax bill, you divide it by four, and then you pay that amount each quarter. And then at the end of the year, when you get two APR, you look at what you paid in estimates versus what you owe. And that’s when you make up the difference. We think that’s the kiss of death for all robbers because never is this year’s tax bill, exactly the same as last year’s tax bill. So if you’re paying your SMS this year, based on what you did last year, and you get April 2007, several $1,000 in taxes, I mean your debt, and April is the worst time for an owner operator to come up with money to pay taxes, we all have a slower fourth quarter. I mean, first quarter business isn’t as good as the rest of the year. We all overextend ourselves during the holidays and paid you know spent too much money on family and friends stuff during the holidays. So we overextend ourselves during the holidays, we don’t make as much money in the first quarter, if we have a whole bunch of money. Like I said, we’re screwed when it comes to paying your taxes because we don’t have that money saved up to pay it. So what we do at BLS is not safe harbor, we spent literally over a million dollars designing our software for estimates. And we made sure estimates on exactly what our clients did, each quarter with their business actually did. So you’re paying estimates based on what your business did real time, not what it did last year. There’s two reasons as important one is because we’re basing your estimates each quarter and what your business actually did. Your estimates are accurate. So when you get to April, you shouldn’t owe a whole bunch more money, because your estimates were accurate. The second reason and most important reason I think that our estimating process is superior, is because since we’re basing your estimates on what you did that quarter, your cash flow matches what you owe. In essence, if you had a slow first quarter, it’s okay, because we’re gonna tell you anything in SMS because you had a small first quarter, if you killed in the second quarter made a whole bunch of money and a whole bunch of estimates. It’s okay. Because you had a great quarter and you’ve got the cash flow to pay a bunch of estimates. So our method matches your cash flow to what you own estimates makes paying taxes super simple.
Jeremy Kellett 49:34
Yeah, that does make it simple, when you actually take the information you already have that they’re turning in. Now, can you get everybody to turn everything in? Is that a hassle for you to get these drivers to send everything to you? I’m assuming it is. That’s why you made an app probably to try to make it easier. I mean, we run into the same thing a lot of times, but do y’all run into that some?
Jeff Amen 49:54
We do run into it. And so it’s you know, the app doesn’t make it much simpler for them to get us their stuff. Or like I said, our property is any piece of paper you get that you think has some to do with taxes, send it to us, let us figure it out. The reason we did the app to make things so simple to get stuff to us is twofold. First off, we want that for quarterly estimates, we want it for years do tax returns. But secondly, and more importantly, we’re every, every day, we’re getting that papers being processed and building the profit loss statement for them. And so at the end of the month, when we provide that profit and loss statement, we want that to be as accurate as it can possibly be, will be accurate if they send us everything. And it’s critical that it’s accurate, because like I said, we benchmark our clients against everybody else doing the same kind of work they’re doing. And that benchmarking, I think is why our clients average 40%, higher net income, anybody that doesn’t use ATBS is because I mean, our clients been with us for three or four years, they love looking at profit loss statements, again, the details. So, you know, my maintenance was this much per mile and, and my fist dam insurance was this and, you know, fuel ran this my fuel communist This is how much my fuel was percent around, I love getting in the weeds. This is my contribution margin, they love talking in all the details about their profit loss statement. But some of them have only been with us a year or maybe two years, they could care less about reading a profit loss statement, they just want to know what they need to do to make more money. So for those guys, they can open up our profit and loss statement, they don’t have to look for all the details and understand how to read that profit loss statement. We literally put green dots and red dots on that profit loss a green dot, you’re doing great in this area, a red dot, you need to make a change here, so you can make more money. And so every single month, if we’re opening up their profit and loss statement, and looking for the red dots and making changes, there are always a best practices, they’re always making as much money as they can.
Jeremy Kellett 51:44
Well, I like the way you guys make it simple to do. It’s a confusing task that has to be done when you’re a businessman. But the more that the simpler you guys might get, the better it is for them. And that that because whether they want to or not, they’re a business man, they’re their owner operator, they’ve got to know these things. And the more they’ll look into it. I mean, the more money there is on the table, you know that they can save themselves and got to pay attention to it when your business like that. And we’ve been doing business with you guys for years. And I can tell you this, there’s very few people that we offer a settlement to duck for, you know, because we you know, you just never know about some of these businesses were hit up all the time about how you offer these to your drivers and settlement deducted and we just don’t do it because we don’t have confidence in a lot of people. But we do have confidence and ATBS and, and our owner operators using a TBS and offering that weekly deduction to where we it because it helps us in the end, like I said, at the beginning of the podcast, you know, if those guys pay attention to their numbers, and they’re making money, then we’re making money there. It’s a great retention tool. It keeps them here. I mean, it’s just a great, great deal all out and I you know, just encourage our owner operators to check into, you know, because you got to be careful of the old friend from high school that does taxes and my, my brother in law knows how to do taxes and I get it done. They’re cheap, and you got to be careful about that stuff because I can reach up and bite yah and you miss out on this, I mean, these guys here, do it every day all day and have 1000s of clients. So I definitely encourage everybody to use ATBS and I really appreciate you guys taking the time out of your busy day and coming on and doing this podcast with me and given our listeners some good information about taxes because it’s here, tax season is here. And it’s got to be done. And I know you guys are putting in some long hours. So appreciate you hanging out with me doing this podcast and coming back and doing it. I would probably expect another call this time next year, Jeff. Just to update everything.
Jeff Amen 53:51
Yeah. Michael said we’ll be ready. Thank you for having us on again. Jeremy. We love we love Oakley with our Oakley clients. Their early clients are absolutely killing it. As I mentioned at the beginning, making 50,000 more than the average owner operator out there. And for us, it makes it really fun to do business with them because your guys do things right and as much as we can help them save in taxes. It’s great for all of us.
Jeremy Kellett 54:16
I appreciate you guys. Thanks for joining. Hi, thanks everybody for watching Oakley podcast comes out every Wednesday we put out a new one you guys be sure and check us out on YouTube. Subscribe, like and comment and it sure helps us out once again. Have a great week. We appreciate it. Talk to you next week. Thanks.
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