If You are paying your drivers as contract labor you maybe in for a big suprise. The IRS doesn't consider them a contractor they are an employee and it is your responsibility to treat them as such. I know that this has been a general practice with small fleet owners and I feel for ya. Good luck and I hope it won't put you out of business. You can go to OOIDA's web site to learn more.
Fleet Owners Beware
- Thread starter babs3361
- Start date
runningturttle
Seasoned Expediter
Where on OOIDA did you find this? I went there and could not find it. Runningturttle
I can't find it either but, I heard it on landline now and on ATBS trucking business and beyond. It has to do with Workers comp and that if you own the equipment you can't have the driver be a contract carrier. The driver is an employee because they have no risk in the business only the equipment owner does. I'm hoping they will give out more info. There are several states that are pursueing this. I did find some articles on this subject on E.trucker.com
I really hope this foray into the subject has some teeth this time. It would certainly and quickly take care of the "too many trucks" thing. Too many trucks is not a good thing. Maybe, equipment will be affordable for the folks that really want to do this, without [the} monkey on their back.
The issue you are talking about is from California I believe. That is one of the states reviewing workers compensation. If you are based there, it may be a issue with some future legislation. That would only be on the state level. Much different than federal guidelines.
Last I read, they were in the early stages of just reviewing it.
You do have to follow certain guidelines to qualify.
Go to www.irs.gov
A good transportation or tax attorney can help guide as well.
Right now I wouldn't worry about it too much unless they make changes past what they are now on a federal level. If they do, you will know it, and you will certainly see big business even outside of transportation jumping in.
Davekc
owner
23 years
PantherII
EO moderator
Last I read, they were in the early stages of just reviewing it.
You do have to follow certain guidelines to qualify.
Go to www.irs.gov
A good transportation or tax attorney can help guide as well.
Right now I wouldn't worry about it too much unless they make changes past what they are now on a federal level. If they do, you will know it, and you will certainly see big business even outside of transportation jumping in.
Davekc
owner
23 years
PantherII
EO moderator
G
guest
Guest
That could apply possibly on a small carrier. Most of the big ones require drivers to carry WC or some type of replacement policy.
As long as that is in place, and paid by the contractor, there shouldn't be a problem. That is my opinion, not a legal finding. But if they are to change that, then of course all bets are off. That would not only affect fleet owners, but anyone with a truck and a lease.
Carriers don't own a truck either, so they would be just as venerable as the fleet owner.
It would also affect quite a few more businesses that aren't transportion related. It will be interesting to follow to see if it goes anywhere. After 15 years of legal battles, it is still in the same place.
Davekc
owner
23 years
PantherII
EO moderator
As long as that is in place, and paid by the contractor, there shouldn't be a problem. That is my opinion, not a legal finding. But if they are to change that, then of course all bets are off. That would not only affect fleet owners, but anyone with a truck and a lease.
Carriers don't own a truck either, so they would be just as venerable as the fleet owner.
It would also affect quite a few more businesses that aren't transportion related. It will be interesting to follow to see if it goes anywhere. After 15 years of legal battles, it is still in the same place.
Davekc
owner
23 years
PantherII
EO moderator
Broompilot
Veteran Expediter
CA NC TN SC GA FL MI WI MN NY RI MA VA DE IN IL IA OH are the states that I know are working with the IRS in auditing tax returns looking directly into this. Local and Feds are out to put an end to this.
If you have been paying your drivers as sub contractors and the IRS determines that they qualify as Employees, all I can say is you better have at least the Cash available NOW to pay the back taxes which will be put on you 100% of SS which is not just 7.65 but X 2 plus any intrest plus any penalities.
If you do not have the cash to pay imm... I would guess its gona be a whole lot more plus Liens against all personal property.
TAKE THIS SERIOUSLY they are out to nab ya and they are gona find ya. You knew it if you did this that it was a grey area but since ole Charlie treated his staff this way why should I not do the same? Two wrongs do not make a right.
The only escape I see is maybee suing your tax consutant if they never warned you that this is shady. But hey when your number 12 at the court house take your turn in line as this is gona be BIG, and I would think your options on bad advice and recooping any $ is bleek at best.
Start saving.
If you have been paying your drivers as sub contractors and the IRS determines that they qualify as Employees, all I can say is you better have at least the Cash available NOW to pay the back taxes which will be put on you 100% of SS which is not just 7.65 but X 2 plus any intrest plus any penalities.
If you do not have the cash to pay imm... I would guess its gona be a whole lot more plus Liens against all personal property.
TAKE THIS SERIOUSLY they are out to nab ya and they are gona find ya. You knew it if you did this that it was a grey area but since ole Charlie treated his staff this way why should I not do the same? Two wrongs do not make a right.
The only escape I see is maybee suing your tax consutant if they never warned you that this is shady. But hey when your number 12 at the court house take your turn in line as this is gona be BIG, and I would think your options on bad advice and recooping any $ is bleek at best.
Start saving.
tallcal101
Veteran Expediter
I'm sorry,I have been preaching this for 4 years.It has been either overlooked because it's coming from the old dude on the left side,or plain denial.This issue could put so many out of buiness,including yours truly up until a few months ago,that it needs to be taken seriously.
This talk about contract this and contract that is all fiddle dee dee compared to the only real contract;the one making your drivers true contractors and not employees.
If an audit detemines they are employees,they go back 5 years on all drivers and impose penalties.
I have warned that failure to meet this standard can result in big trouble.It's nothing to mess with and I suggest any owners out there do their homework and come up with a plan.As mentioned before,my household goods drivers(both company drivers and O/Os)need to show substantial risk if they want to be considered independant.The contracts are 20 pages long and meet the IRS interpritation of true independant contractors.This issue will be raising it's ugly head as the IRS targets industries like trucking in the months and years ahead.
This talk about contract this and contract that is all fiddle dee dee compared to the only real contract;the one making your drivers true contractors and not employees.
If an audit detemines they are employees,they go back 5 years on all drivers and impose penalties.
I have warned that failure to meet this standard can result in big trouble.It's nothing to mess with and I suggest any owners out there do their homework and come up with a plan.As mentioned before,my household goods drivers(both company drivers and O/Os)need to show substantial risk if they want to be considered independant.The contracts are 20 pages long and meet the IRS interpritation of true independant contractors.This issue will be raising it's ugly head as the IRS targets industries like trucking in the months and years ahead.
We have an acquaintance who has several DR trucks. He believes he has solved the IC/employee problem by only hiring corporations to operate his trucks. He does not just lease drivers, he leases teams who have incorporated themselves and are employees of their respective corporations, not the owner of the truck.
Perhaps this is something for fleet owners to run by their accountants before the faecal matter hits the fan.
Perhaps this is something for fleet owners to run by their accountants before the faecal matter hits the fan.
Terry,
There were several that tried that approach with Fedex ground and they ran into problems. Not sure of all the specifics, but as you mentioned, I would certainly look into it.
Additionally, ground has a lot more issues than CC
All eyes are on that case in CA. that they are appealing.
You did need a contract AND you have to meet certain criteria as Talcal mention.
Our attorney did mention that the ones that cover all costs, including fuel, are especially vulnerable.
Another reason we don't do a 40/60 split.
We got audited several years ago and had to make a few adjustments because of that. Good news is we didn't have back taxes or penalties.
Kind of a friendly warning of what we had to do.
Davekc
owner
23 years
PantherII
EO moderator
There were several that tried that approach with Fedex ground and they ran into problems. Not sure of all the specifics, but as you mentioned, I would certainly look into it.
Additionally, ground has a lot more issues than CC
All eyes are on that case in CA. that they are appealing.
You did need a contract AND you have to meet certain criteria as Talcal mention.
Our attorney did mention that the ones that cover all costs, including fuel, are especially vulnerable.
Another reason we don't do a 40/60 split.
We got audited several years ago and had to make a few adjustments because of that. Good news is we didn't have back taxes or penalties.
Kind of a friendly warning of what we had to do.
Davekc
owner
23 years
PantherII
EO moderator
>We have an acquaintance who has several DR trucks. He
>believes he has solved the IC/employee problem by only
>hiring corporations to operate his trucks. He does not just
>lease drivers, he leases teams who have incorporated
>themselves and are employees of their respective
>corporations, not the owner of the truck.
Incorporation is not beneficial to all drivers in all situations. The compliance burden and expenses would be something to consider before signing on with a fleet owner that requires incorporation as a condition of doing business. There are other fleet owners out there that do not require their drivers to take on the burden of incorporation.
>believes he has solved the IC/employee problem by only
>hiring corporations to operate his trucks. He does not just
>lease drivers, he leases teams who have incorporated
>themselves and are employees of their respective
>corporations, not the owner of the truck.
Incorporation is not beneficial to all drivers in all situations. The compliance burden and expenses would be something to consider before signing on with a fleet owner that requires incorporation as a condition of doing business. There are other fleet owners out there that do not require their drivers to take on the burden of incorporation.
greg334
Veteran Expediter
Sorry Phil this is beyond finances.
Dave, contracts are important. Having them written for the purpose to define responsiblities, who get what and how the risk is shared or not shared matters. I agree with Tallcal, but I am not worried about the IRS, they are doing two things, chasing 'lost' money and some one is getting promotions by identifying and auditing people.
I say one solution is remove the IRS, support the Fair Tax - Get Smart About Life Liberty and the Pursuit of Happiness(c)
Dave, contracts are important. Having them written for the purpose to define responsiblities, who get what and how the risk is shared or not shared matters. I agree with Tallcal, but I am not worried about the IRS, they are doing two things, chasing 'lost' money and some one is getting promotions by identifying and auditing people.
I say one solution is remove the IRS, support the Fair Tax - Get Smart About Life Liberty and the Pursuit of Happiness(c)