How Are You Getting Paid for Tolls?

[ATeam]

Diane and I have been off the road on vacation for the last two months and are just now beginning to run. Significant hikes in tolls have taken effect after January 1 that we encountered for the first time this year on a run to the Northeast. The size of the hikes is obscene!

A few years ago, when Diane and I ran with FedEx Custom Critical (we are with Landstar Express America now), the company announced that tolls would be charged to customers and passed on to the trucks. Knowing then that big toll increases were coming in the future, I thought that was a visionary and fair thing for a carrier to do.

It is always important for owner-operators to protect their profit margins. The recent toll hikes make it especially important today. The shipping community will not react immediately to the toll hikes but you must pay them now. In many cases, shippers will do whatever they can to have you pay the higher tolls out of your pocket forever.

I have two questions:

1. For those of you who run with FedEx Custom Critical, what are you seeing regarding tolls, and especially the most recent toll hikes? Is the company's toll policy working for you, in whole or in part?

2. For the rest of you, what are you doing, or what is your carrier doing to protect your profits from toll erosion?

 

[paullud]

It was nice of MD to raise the tolls for trucks and lower them for cars at the same time. The company I am with books loads for a set rate, it has to make sense when we take into account tolls so the tolls are basically passed on to the shipper.

Sent from my ADR6400L using EO Forums

 

[OntarioVanMan]

For me personally....well Load 1 pays all tolls....I chose to pay them.....
First...if Load 1 pays them..it is income, which is taxable.
In my case I need every deduction I can get to lower my tax liability....hence I pay the tolls....It actually works out in my case the deduction lowers my taxes by more then the tolls are worth in cash....weird eh?

 

[usafk9]

For me personally....well Load 1 pays all tolls....I chose to pay them.....
First...if Load 1 pays them..it is income, which is taxable.
In my case I need every deduction I can get to lower my tax liability....hence I pay the tolls....It actually works out in my case the deduction lowers my taxes by more then the tolls are worth in cash....weird eh?

Huh?

If you incur the toll charge, and Load-1 pays you for that expense, there's no gain.

What am I missing.....the metric conversion?

 

[SHARP327]

I grin and bare it then claim it at the end of the year while doing my taxes.

I try and negotiate my rate according to tolls along my route.

 

[idtrans]

Huh?

If you incur the toll charge, and Load-1 pays you for that expense, there's no gain.

What am I missing.....the metric conversion?

I agree LOL seriously tolls are not taxable income! but guess some guys could care less!

 

[OntarioVanMan]

Huh?

If you incur the toll charge, and Load-1 pays you for that expense, there's no gain.

What am I missing.....the metric conversion?

so if Load 1 gives me a check/payment for $100....it won't be on my 1099 as income?
I know for a fact..if Load 1 pays me...then I can't use it as a deduction...

 

[paullud]

so if Load 1 gives me a check/payment for $100....it won't be on my 1099 as income?
I know for a fact..if Load 1 pays me...then I can't use it as a deduction...

It shows up as income on the 1099 but you have toll receipts to make it a wash. If you get paid for tolls but don't take the toll road then you would get taxed on it as income. I think the other guys got what you said confused a little in the previous post and missed the part that said that is why you run the toll road.

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[Steady Eddie]

2011 I paid out of pocket 89.00 Express-1 paid the rest. In 2010 I paid 389.00 out of pocket. Both amounts were claimed on my taxes as expense. So what E-1 paid was revenue, what I paid was expense, (less the revenue), showed a loss for me after revenue. Some runs paid short on tolls in 2010 and 2011. Never washed for me, due to some dead head on my own on toll roads.

 

[Dynamite 1]

ya, thats kinda the way we do it to. what the carrier pays for is shown on the 1099 as income and delt with accordingly, what we pay is a deduction.

our tolls are all reimbursed, if we turn them in.

 

[ATeam]

Let's clear up the tax questions about tolls and then get back to the original questions if we can.

A toll paid to drive your truck on a toll road (bridge, tunnel) is an expense. It does not matter if it is reimbursed by your carrier. It does not matter if you pay it under load or on deadhead miles. It does not matter if you are deadheading to get to a pick up or deadheading to get home. If you pay a toll to drive your truck on a toll road, it is a deductible business expense.

So let's say you pay just one toll of $10.00 in 2011. At the end of the year when you do your taxes, that $10.00 expense will reduce your profit (Schedule C, Line 31) by $10.00.

If your profit was say $30,000 before the toll was paid, it will be $29,990 after the toll was paid. If your carrier reimburses you for that $10.00 toll, your profit would increase by $10.00 and return to the $30,000 figure.

If you choose to not collect the $10.00 reimbursement that your carrier is willing to pay, your profit will be $29,990 instead of $30,000. What difference does that make in your pocket after taxes?

To answer that question we go to the 2011 tax tables.

Now, at this point, I am going to over-simplify the example and ask you to assume that there are no other deductions or adjustments to think about. Of course there will be on a true tax return but to illustrate the impact of tolls and to keep things simple, I am asking you to go with this over-simplified example.

If your are married filing jointly, taxes due on $30,000 is $3,654. Taxes due on $29,990 is $3,646. That is an $8.00 difference, meaning that by not collecting the $10.00 reimbursement from your carrier, you saved $8.00 in taxes.

But to get that $8.00 in tax savings, what did you have to do? You had to give away $10.00 cash that you otherwise could have had, thereby creating a net loss to yourself of $2.00. You are throwing a $10.00 bill out the window to save $8.00 in taxes.

It is better (and more profitable), I think, to collect the toll reimbursement and come out $2.00 ahead. To do otherwise is to let the tax liability tail wag the business profitability dog.

Disclaimer: I am not an IRS Enrolled Agent or CPA. I'm just a truck driver rendering my opinion on this topic. Readers are urged to consult tax professionals on such matters.

 

[chefdennis]

I am with OVM...Load 1 will reimburse all toll, but they get the TOLL RECEIPTS...the amount they pay out, then becomes THEIR deduction.....An also like OVM, i never turn them in, I keep them and I deduct them....and its been that way as long as i have been doing this....Oncw you turn the receipt over for reimbursement, you no longer have the right to deduct that amout and that amount goes right on your 1099 as income....

I might look at it totally different if i were paying what you all in ST/TT are paying, for for the amount I pay in a van....not a big deal at all...I guess thats why i will never be rich...well that along with the fact that i never use my "points" off my Fuel Loyality card to get a subway sandwich or a slice of pizza....

 

[ATeam]

I am with OVM...Load 1 will reimburse all toll, but they get the TOLL RECEIPTS...the amount they pay out, then becomes THEIR deduction...

Are you sure about that?

We need to draw a distinction here.

The receipt does not give you the right to take a deduction. Payment of the toll does. A receipt is proof that the deducted expense was incurred, not the expense itself. Who paid the toll? I did. Who incurred the expense? I did. Who gets to deduct that expense? I do.

If I ran for a carrier that reimbursed me for tolls upon receiving proof of payment, I would deduct the $10.00 (in the above example) and provide a copy of the receipt to the carrier so I could be reimbursed. If the carrier required original receipts, I would provide them but first scan them so I would have proof of payment to show the IRS if I was ever audited.

The IRS will accept the scanned copy as an original but even if some misinformed, pencil-pushing IRS auditor did not, I could explain the deduction by showing the copy and the written carrier policy stating that original receipts are required for toll reimbursement.

In IRS eyes, the carrier is not paying $10.00 to me as a toll reimbursemnt. It is paying $10.00 as income. The IRS does not care what the carrier calls that part of my compensation package (tolls reimbursed). The IRS only cares that the $10.00 paid by the carrier is reported by the carrier as income paid to me.

While you may send your toll reciepts to your carrier, the IRS will never ask the carrier to provide them as proof of toll payments made, because the carrier did not pay the tolls and would not claim toll expense as a deduction. The carrier does not need your toll receipts for IRS purposes. It needs them only as proof that you paid out the toll money the carrier is reimbursing you for.

The $10.00 is not decucted twice as you seem to think, because it is not the same $10.00. The toll expense is not decucted once by you and again by your carrier. It is deducted once by you and that is the end of it. The $10.00 the carrier pays out as income to you is deducted as such by the carrier, not as a toll payment.

.....An also like OVM, i never turn them in, I keep them and I deduct them....and its been that way as long as i have been doing this....Oncw you turn the receipt over for reimbursement, you no longer have the right to deduct that amout and that amount goes right on your 1099 as income....

That is simply not the case. If you pay the toll, you can deduct the expense. See above.

Yes, the amount your carrier pays for toll reimbursement shows up on your Form 1099 as income. But that amount will be reduced by the same amount on your Schedule C, Line 31 if you take the deduction.

Declining to collect your carrier's reimbursement for tolls does not save you money. It costs you money.

 

[ATeam]

I know for a fact..if Load 1 pays me...then I can't use it as a deduction...

You are mistaken. See post #13 above.

 

[usafk9]

You are mistaken. See post #13 above.

Could not agree with you more, Phil.

It's like saying that you need to buy a new truck......because "you need a write off".

CD & OVM- I'd say to run your logic past your accountant. If they agree with you, fire them.

 

[CharlesD]

Our drivers get percentage. If I'm bidding a load going through a toll area, I just add the toll amount to the bid plus our cut. So if for example we have a truck sitting in NJ and a load pops up on Long Island the bridge tolls to Long Island and back out are I think around $80 right now. So I would add over $100 to the bid so the driver's pay included the money for the tolls. I try to keep up on what the tolls are for most of the major toll roads like the bridge tolls in NYC and the New Jersey, Ohio, Pennsylvania, and Indiana turnpikes. Normally it's not that difficult to get the extra cash on the load price. That's how we handle it.

 

[greg334]

If you are a driver - this is meaningless. but for owners, you get paid for the job, not for any specific breakout of compensation to do the job.

So if they pay you to buy dry ice for a shipment and add to the settlement, it is an expense because you are being paid for the job, nothing else.

 

[chefdennis]

My accountant as been over this more then i have since he did my dad taxes when he drove and i was a kid when that was happening...the reimbursement is a payment of an expense, once you have reimbrusement, your expense is no longer valid as it is a "pass through" the expense goes to the carrier when they are provided the receipt and make the payout....I have the expense because i do not take the re-imbrusement from the carrier so there is no "pass through"....and yes if i buy freight blankets and the company pays me for them, that is their expense, not mine...and the blankets become the property of the carrier at the time they wish to ask for them..

Now, what greg said is right also...if the toll payment, or any other payment to the o/o is simply added in the the pay for the run and not shown as a "line item accessorial", then those cost become nothing more the expense to the o/o and are a deduction...but once broken out as a "line item accessorial", they become a "pass through"...and neither income nor deduction...

If you are dispatched on run that has a toll road and the carrier showes the "accessorial" charge on the qc and then payes you at settlement and is shown as a seperate line item on the settlement, that is neither income or expense that your accountant will remove as a 'pass through" as to not show as income at tax time because it is neither a expense nor income to you.

Now, lets complicate it a bit more, what if you took a run that has toll payment that showes on the QC as a accessorial, but you route yourself to avoid the toll...how are you handling that??

PS: I have the same situation with my "Personal Chef Business"..I buy the clients food with my own cash..I then bill them on 1 statement showing the cost of the food (no markup) and the cost of their weekly service. They pay me and even while i paid for the food, it is not an expense to me, as it is a "pass through" on my books.....

 

[ATeam]

Before I accept as correct your explanation of "pass through," I want to see the IRS instruction that talks about it.

I have never seen a carrier issue a Form 1099 with anything on it except income. That number is reduced by listing expenses on your Schedule C (for a sole proprietorship). The resulting profit or loss is thereby determined and the amount of income tax due is based on that number.

When I review the 2011 Schedule C instructions, no mention is made of pass through (passthrough, pass-through) income or expenses.

Pass through? What does that mean exactly, not to you but to the IRS? What tax law provision can you point us to that shows that "pass through" exists as you describe it?

Regarding the expertise of accountants, just as you see good expediters and bad expediters who have been in the business a long time, so too with accountants. Just because your accountant has been at it a long time, it does not follow that he is right.

 

[chefdennis]

The 1099 will not show anything other then the total amount, it is up to the taxpayer to provide the information on all deductions and expenses..your 1099 doesn't show your fuel deduction either....it just shows the total gross to the truck, but you still provide the info to your accountant so that he can do the best in preparing your return...My "settlement sheets have "line tems" that would be considered "accessorials" shown seperately....layover pay, empty move pay etc....and if i took the toll reimbursement,Ibased on how things are shown on the settlement sheet, i would think it would be shown seperate also..but since i don't take or ask for it, i can not be completely sure..

As for good or bad , long time or short...you are exactly right, and the trust put in any service provider is one that is earned from the consumer..i am fine with my accountant..as i am sure you are with yours....

As for the use of the verbage "pass through"..it is simply that, verbage..it may or my not be the correct term in the irs codes...

And as for being in business a long time, in this business, not so long..in business for myself, yes longer than alot here have been alive...as to paying taxes, i have been screw with the irs as long as i have been working, and will continue to do so until i die....i can promise you, i have been audited more then most, won some lost some, and i have np doubt i will be auditted again sooner or later..its all in the game.....

One more thing, While this thread was and is about "Tolls", it has taken a "tax" bend to it...One thing i will say as i have said here on this site in other threads when the topic of "Taxes" comes up, nothing i say is to be considered advise, i do not recommend anyone do things as i say or do, not all things i do with when dealing the irs would be considered "kosher" by some, thats is why i have the accountant i do, we think alike...But again, nothing said here is to be taken as advise....