Three Things to Know Before Getting Your CDL

CDL school

If you want to become a truck driver, your first hurdle is getting a commercial driver’s license (CDL). You’ll need one to get commercial truck insurance and to get a job. Before you take the skills test, which includes the pre-trip inspection test, you must pass a basic knowledge test (multiple choice questions you’ll answer on a computer).

The basic requirements for CDL holders are set by the federal government but the license is issued by the state government where the applicant lives, and each state has its own additional requirements. There are three types of CDL licenses: A, B and C. They’re classified primarily by weight and you can see the breakdown here.

Those are the preliminary basics but there are other things you should know about the process of getting your CDL. You’re laying a foundation for what could be a long and productive career. These tips will help you get off on the good foot.

1. Don’t try to do it alone.

It’s been tried – an aspiring driver who’s good at studying on his own and has a friend with his CDL passes the exam, only to find out that companies won’t consider hiring him since his training wasn’t with an accredited school. It may be tempting to save the time and money and do a program of self-study to pass the CDL, but it’s not going to get you the job.

2. A private CDL school is usually a better deal for the driver than company school.

If you hire on as a newbie with a company, before you have your CDL, they’ll teach you what you need to know to pass the exam, but you’ll be in hock to them for that training. They’ll deduct it from your paycheck soon as you have some income. And even though they’ll most likely employ you (unless you really mess up), the rate they’ll pay is usually lower than what you’d get driving for a company that didn’t train you.

Also, as part of your employment agreement, you’ll have to commit to stay with the company for one or two years. If the job isn’t your cup of tea, for whatever the reason, you’re legally bound to pay the balance of what you owe.

A plus of training with your employer is they will usually put you up for the three to four weeks you’re learning. The minus is you’ll be sharing a motel room with a roommate or two who might not share your sleep or study habits.

A private CDL school course will set you back between $3,000 and $5,000, but in the long run, you’re going to have more employment options. And most companies will take inexperienced drivers with CDL training. They’ll set you up with orientation and a trainer. You might even get the money you shell out for CDL school since some companies offer tuition reimbursement as a perk. Make sure you find out what you have to do to qualify.

Plus private schools teach you on a manual shift truck – which a company may not always do. If you train on an automatic transmission and ever want to work with a truck that’s manual, it’s going to be a much tougher adjustment.
One caution though about private CDL schools: Don’t just shop on price. There are schools offering “deals” on getting your CDL, but they may not be state-accredited. They may also offer what they call “free” training, but you’re going to be on the hook for paying them back once you get a job. It’s also a good idea to find out the pass rate of any school you’re considering.

3. Finishing CDL school gets you only part way down the road.

After you finish CDL training, you’ll still need to prepare for the exam. One of the best ways to do this is by taking practice tests, preferably ones that were written relatively recently. Since rules and laws are always changing, practicing with an old test means you’re studying outdated info. Try to find a source that’s compiled from actual CDL test questions and ask when they were most recently updated.

Check your state’s DMV website for a free sample test and here are some other sources:
Crist CDL Training Center
Truckers Report CDL Practice Tests

Also, study the information booklet your testing center provides. It’s a great way to review. And download and read your state’s CDL manual here.

And remember CDL school will only teach you minimum required for passing your CDL exam. But you want to do more than just pass the exam and get your first job. You want to make a decent living – not just drive a truck. With the turnover rate for first year drivers around 200% (according to Overdrive magazine) it’s going to take more preparation and education than you’ll get attending CDL school. Improve your odds of succeeding by preparing yourself not just to drive but to be a successful business person.

Find more info about the skills you need to succeed as a driver by also reading these articles on LTL.com:

Are You Cut Out to Be an Owner-Operator?

You Just Inherited a Truck. Sell it or Hire a Driver?

Driving Skills for a Smaller Fuel Bill

Questions to Ask When Hiring a Tax Preparer

1040 form and calculator

This guest blog post comes from Esta Klatzkin, EA, a tax and financial consultant who specializes in providing tax accounting and financial services to Owner/Operators, contract haulers, and other long-distance truck drivers in the transportation industry. Learn more about Esta and her company, kNOw TAXES, by clicking here.

The key to finding the best tax preparer for you, as with hiring any professional, is to find out about more than just the prices. Here’s a list of questions you should ask anyone offering to prepare your taxes:

1. Do you have a PTIN (preparer tax identification number)?

Anyone who prepares federal tax returns for compensation must have a valid 20 L4 PTIN before preparing tax returns. Without a PTIN, the preparer is not allowed to prepare your return.

2. What is your tax background?

Take a look at the preparer’s business card and the letters after his or her name. Here’s a guide to what they mean:
An Enrolled Agent (EA) has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three part comprehensive IRS test or through experience as a former IRS employee. EA status is the highest credential the IRS awards. EAs must adhere to ethical standards and complete 72 hours of continuing education courses every three years.

A certified public accountant (CPA) is certified by the state to act as a public accountant. A CPA is the only licensed qualification in accounting. To be certified, candidates are required to pass an exam.

3. Have you prepared a tax return for truckers before?

Tax preparers may focus on small businesses, corporations, partnerships, etc. There are as many variations as there are schedules and forms. But nobody can do it all.

4. Do you know the requirements of the states and localities where I am required to file?

Yes, federal income taxes know no boundaries- those rules don ‘t change from one state to the next. But that’s not true when it comes to states and localities. Make sure that your preparer knows – and can handle- all of those state and local filing requirements.

5. What records and other documentation will you need from me?

A reputable preparer should insist that you provide your forms W-2, 1099, 1098 and other verification of income and expenses in order to prepare a proper return. The tax preparer should provide a tax organizer. A tax preparer should be able to explain what will be needed for special schedules, forms or circumstances.

6. How do you determine your fees?

Prices may vary based on the complexity of your return, whether you require additional schedules, supporting forms or whether your return has “out of the ordinary” line items. Avoid preparers who base their fee on a percentage of your anticipated refund: they have a financial incentive to encourage them to create credits and deductions.

7. Can I file electronically?

It’s the fastest way to get your refund and tends to result in fewer math errors. It may also be required: a paid preparer who prepares and files more than ten client returns must file electronically unless client opts out.

8. Who will sign my return?

Remember that your preparer must have a PTlN. The PTlN and the preparer’s signature need to appear on your tax return. Don ‘t trust a preparer who refuses to sign a return. And be wary of any preparer or service who won ‘t tell you in advance who will actually be preparing the return.

9. When will I receive a copy of my return?

It’s not unreasonable to leave your preparer’s office without a copy of your completed return; assembly may be required. However, you should receive a complete copy of your return within a reasonable amount of time following your appointment. If your preparer can’t promise you a copy at all, run, you will need a copy for your own records. The law states that the preparer provide you with a copy.

10. How do I find you if l have a question or a problem after tax season is over?

Make sure that you know how to contact the tax preparer after your return has been filed. If your tax preparer won ‘t be around, consider taking your business elsewhere.

11. What happens if l get audited?

Nobody wants to think about an audit when filing a return. Find out how the tax preparer handles audits or examinations from IRS: will he or she respond to those questions? Represent you in front of the IRS or Tax Court? And what about the cost to fix any mistakes? How is that calculated?

Choosing a good tax preparer does require a bit of research and effort on your part but it’s worth it. Just as you stick with other professionals from year to year, the goal here isn’t just to fill out a form but to create a working relationship. A good tax preparer won’t mind answering your questions.

Are You Cut Out to Be an Owner-Operator?

semi in the front yard

Google “How to become an owner-operator,” and there’s plenty to discourage you from considering the question for long. 

Brett Aquilla, a former company driver, says “you have to be crazy” to take on buying your own truck and becoming a business owner. He advocates the employee route and letting your employer hassle with the financial strain, licensing, permits, breakdowns, insurance, etc.

“Kick back, earn $55K, and make a killer living viewing the sites across North America in your company’s dream machine,” he says. “And if you get tired of trucking – quit. A company driver can always just quit and return later at any time.”

Some drivers, though, have been down the employee road and haven’t found it to be the walk in the park Aquilla describes. Company drivers have their own hassles including company politics, power-tripping dispatchers, and having to haul loads and run lanes that don’t suit them.

And some are just more interested in having their independence and the sense of satisfaction that comes from succeeding on their own guts, wits and hard work.

If you’re thinking about it, here are some sources for the tough questions you’ll need to ask yourself.

Make Sure You’re Doing it for the Right Reasons

Small fleet owner and radio show host Kevin Rutherford says most people considering the move to being an owner-operator will list three reasons they want to do it: First, usually is “to make more money. Then it’s more ‘freedom’, ‘less hassle’, ‘fewer rules’. If your answers sound like these,” he says, “think again before you proceed,” because you’re likely to be disappointed.

According to Rutherford there are better reasons for taking on the additional work and away-from-home hours. Drivers who transition successfully to owner-operators are usually those who do so because they want the additional responsibility and challenges of being a business owner, and want to build a business that will support better lives for them and their families. Read the list of questions Rutherford suggests you ask yourself to further test your assumptions about being an owner-operator.

It’s a Whole Lot More than “Steering and Gearing”

Truckie D is an owner-operator with 1 million+ consecutive safe over-the-road miles who blogs at TruckieD.wordpress.com. His advice, if you haven’t driven a truck before, is first to slow the heck down and get hired somewhere first, drive for a year and then see if you’re still in love with the idea of being an owner-operator.

“But”, he says, “do NOT get sucked into getting trained and buying/leasing a truck immediately. That’s a recipe for going broke quickly. Trucking as an owner-operator is a whole lot more than just ‘steering and gearing.’ The important point to remember is, you’re not buying a truck — you’re buying a business. You need experience in the trucking business, and some general business experience if you want to be successful at it.” Being able to understand a profit and loss statement and understanding how to do a cost benefit analysis of say, adding an APU to your truck, are just a couple of the business skills you’ll need to master.

See his blog post, “So, You Want to Be an Owner Operator,” for more some more sobering reality checks about owning your own truck driving business.

If You’re Still Not Scared Off…

Samuel Barradas readers through 6 steps to becoming an owner-operator on The Trucker’s Report blog. First, is a personal assessment – how much time you need at home, health considerations, career goals, etc. Next is a list of financial considerations to mull: the risks of personal debt, establishing an emergency fund and whether your credit score is going to help or hurt you. He also addresses the questions of whether to go independent or lease to a company, what types of equipment to shop and run, and what legal and accounting structures you should have in place.

Increase Your Odds of Succeeding

According to the National Assoc. of Small Trucking Cos (NASTC), the failure rate of small, start-up trucking companies is about 85%. Only 15% make it to the second year of operation. The organization offers training to help aspiring fleet owners beat the odds. On their website you can find more info about their training.

On that page you can also find a list of 20 new authority concerns, just the tip of the iceberg as far as the kind of business planning you’ll need to do: How do you plan to find freight? Where do you plan to run? How will you find insurance? How are you going to keep the books? How are you going to do log audits, fuel taxes, and driver qualification files? How are you going to manage and interpret data and information?

Lots to think about, but looking at it all before you leap will save you a lot of stress, debt and disappointment.

How to Get the Best Deal on Commercial Truck Insurance

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When you’re shopping insurance, the first thing to know is that what appears to be the best deal may be nothing more than a low price on a crummy policy that will cost you much more in the long run.

Insufficient coverage makes you vulnerable to citations, lawsuits and can doom you to some very unpleasant downtime. You don’t want to be on the side of the road while an officer makes the determination he has to ground you since your proof-of-insurance is not on file in your home state. And buying coverage from a company that’s slow to pay claims can impair your ability to do your job and send your personal finances into a tailspin.

Unfortunately shopping commercial truck insurance is a time-consuming hassle. But it’s also true that if you don’t take the time, you’re setting yourself up for bigger hassles down the road. So while there may be no silver bullet to saving on insurance, there are some best practices that can help you focus your efforts and get the best possible deal for your specific situation.

First, Do the Research

Always investigate an insurance company before committing to a policy. Risks to look out for include companies that cut rates to get customers and then find themselves unable to pay out in a timely fashion when claims come in. Avoid underfunded companies by checking ratings to make sure they have the financial reserves to take care of their customers.

An article originally published in Overdrive Magazine explains that rating companies like The A.M. Best Company, Standard & Poor, Weiss Research, and others rate insurance companies on their financial strength and their customer service and provide that information for free. Ask the agent to see copies of reports published by these impartial rating services or check the ratings company website yourself. Libraries also carry ratings reports.

Compare Coverage from Three Different Companies

Get at least three different quotes from three different companies and read their offers carefully. Price is only one variable to compare. Look at extent of coverage – what situations are not covered? Consider terms and conditions of each policy and what rules and regulations the company requires you to follow in order to be entitled to a payment if you have a claim.

Policies are sometimes written vaguely about what benefits you give up to get a lower price. Make sure you’re clear about what the policy actually says. Overdrive Magazine suggests these questions when comparing quotes:

• What is the total value in time, money, and convenience – of the products and services provided?
• Are their claim procedures easy to follow?
• Are their employees knowledgeable, helpful, and accessible?
• Do they respond promptly when you need help?
• Do they provide skilled assistance in reducing accidents and passing DOT audits?
• If so, are there additional charges for such assistance?

Beware of These Scams

If you haven’t done your research and unknowingly throw your lot in with an unreliable insurance company, you may find yourself a victim of the Three Ds tactic, where insurance companies Delay, Deny and Defend to avoid paying a claim.

If an insurer deliberates for weeks and then offers much less than what is claimed, they may be hoping you’ll just accept the reduced payment rather than spending more time fighting for what you’re owed. As explained in this handy commercial truck insurance overview (scroll down), the best way to combat this tactic is to conduct all communications in writing and state in no uncertain terms that you will not back down. In the vast majority of cases, the company will come up with the fair payment, but be prepared to take them to court if it comes to that. There are many legal precedents for claimants winning these cases.

Dishonest carriers sometimes commit their own insurance scams, according to this Truckers Report Insurance Cheat Sheet. They take out a truck policy to cover one or two drivers, get their MCS-90 endorsement and employ more drivers than they’ve insured. If any of these uninsured drivers are in an accident, the MCS-90 endorsement means the insurance company will pay the claim but the insurer can then recover costs from the owner-operator if the motor carrier “disappears.” Avoid this scam by reviewing coverage terms in the carrier’s policy before accepting a load.

Other Tips for Saving on Commercial Truck Insurance

TheTruckersReport offers more ideas for making sure you get the best deal on commercial truck insurance:

  • Pay your insurance up front at the start of the year, rather than paying in installments. This could save you around 15%.
  • Be honest about the value of your truck. Overstating it only sets you up for paying higher premiums since the company will charge you to replace the vehicle based on the value you state, but they’ll only pay a claim based on the market value of the truck.
  • If your insurance agent is coming to inspect your vehicle, invest a little time in sprucing up your truck. A tidy cab is safer and agents will notice. It also improves your image as a conscientious driver.
  • When it’s time to renew your insurance, talk with your current insurance agent and mention you may shop around a bit. Usually he’ll be interested in negotiating a lower premium in order to keep your business. Word to the wise: make sure your coverage is not downgraded as a result.

And here are some final buyer beware tips from Team Run Smart [https://www.teamrunsmart.com/articles/drive-smart/june-2013/how-to-cut-insurance-costs-and-improve-your-csa-sc]:

  • Avoid paying for unnecessary coverage. Check with your carrier to see exactly what insurance you’re already paying for through them. Ask for a thorough breakdown of limits, declarations, deductibles, etc. Many times the descriptions are vague and drivers may not realize something they’re paying for independently is also being deducted from their settlements.
  • You can avoid extra interest charges by not wrapping insurance into the price of your truck. If your lease agreement doesn’t require this, there’s no reason to pay interest on insurance premiums within your truck loan.

Tips for Maximizing Your Tax Deductions

8571667_mProbably one of the most procrastinated chores in human history, filing your taxes can be less painful if you’re paying less. And the best way to pay less tax legally is by maximizing your deductions. Below are some ways to make sure you’re getting as much as possible of your money back from Uncle Sam.

Save All Your Receipts – A lot of drivers mistakenly assume they don’t spend enough to itemize and deduct their expenses, but it’s easy to forget all the things necessary to live on the road and maintain a truck. Try keeping all your receipts for a week and see what you’re shelling out.

In the trucking industry, drivers can claim expenses for fuel, repairs, supplies and maintenance, meals and daily living expenses on the road, mobile phones and computers (that are 100% business use), tolls and other fees, depreciation and contributions to a retirement account. Mileage is another key deduction. For 2013, the IRS is granting 56 ½ cents a mile for business use of your vehicle.

XRSCorp.com offers a good overview of each of these to help you better understand what expenses may qualify as deductions.

Itemize Your Expenses – Taking the standard deduction is easier, but you can save a ton if you itemize. The 2013 standard deduction is $6,100 for singles and $12,200 for married couples filing jointly, and if your qualified expenses exceed those levels, it’s definitely worth the trouble to itemize. If you’re self-employed, own a home or live in a high-tax area, your qualified expenses you can reach those levels pretty fast.

Calculate Your Per Diem – There are two ways to take the per diem:

1) Save your receipts and itemize. You can deduct 80% of your total expenses.
2) Track the number of full days and partial days you’re on the road. You can deduct 80% of the IRS’s government’s per diem rate of $59.00 per day for each full day (in Canada, it’s $65.00), and $35.40 for each partial day. (The IRS doesn’t consider 20-hour day where you still sleep at home to be a full day. You’ll have count that as partial.)

If you haven’t done a great job retaining and organizing your receipts, you want option two, but if you think you’re spending more than $59.00 per day on expenses, make a commitment to yourself to get a better system in place for keeping your receipts in 2014.

If you’re a company driver, you can only take deductions for expenses required by your employer that aren’t reimbursed by your employer.

TeamRunSmart.com has a more in-depth explanation of exactly how to calculate what you can claim for your per diem. Also see Owner-Operators Independent Drivers Association’s (OOIDA’s) website for per diem explanation for company drivers.

Maximize Your IRA Contribution Up ‘Til Apr. 15 – If you’re under the age of 50, you can deduct all contributions to a qualifying IRA or Roth IRA up to $5,000. If your 50 or older, $6,500 is deductible. You have until the filing deadline of April 15, 2014 to make contributions for the 2013 tax year.

Figure Out If Your Capital Losses Can Offset Your Gains – It’s too late to improve the picture for 2013, but bear in mind for 2014 that capital gains and losses on business property can affect your tax picture []. Deb Tibbitts, Senior Accountant at ATBS, explains what to look out for. Toward the end the year, it might make sense to delay selling something – whether that’s a truck or a stock – if it’s going to bump you into a higher tax bracket.

Similarly, Howard at PBS Tax points out that with stocks at record highs, beware that taking any gains can come back to bite you when you file for 2014. Also, it’s a good idea to take a look at your investments in general, and if one stock has become too large a percentage of your portfolio, consider selling some of it. More of Howard’s tax tips are on OOIDA’s site. And he even offers his phone number to any driver with tax questions: (800) 697-5153.

Questions?

Good online sources for answers to your tax questions:

H&R Block’s Tax Institute
TurboTax

And you can download Your Federal Income Tax (2013) (Publication 17), the IRS’s general guide for individual taxpayers.

Just in Case April 15 Comes Up Too Fast

Download an IRS extension form http://www.irs.gov/uac/Extension-of-Time-To-File-Your-Tax-Return from their website, but don’t forget an extension on filing doesn’t mean you get more time to pay your tax. You’ll still need to estimate what you expect to owe and pay when you file for the extension.

Be Ready for Next Year

Get a jump on 2014 with these tax planning tips for truckers.

 

Please note: This article is just a guide for deductions you may be able to take. Be sure to consult a tax preparer for deductions you’re actually eligible to take.

 

ObamaCare and You: More Fun with Regulations

10190385_mIf you’re not sure what the Affordable Care Act (ACA or ObamaCare) means for you, you’re not alone. You may be unsure if your employer’s insurance company will renew your policy, cancel it or increase your premium. If you’re self-insured, you may be trying to make sense of what’s available. Will you be eligible for a subsidy or subject to a penalty? Is it better to stay on a spouse’s policy or get individual coverage?

Holly and David McCombs are looking at their situation and trying to determine which path for covering their family’s health expenses will be least painful. The wife of Maryland-based owner-operator, David McCombs, Holly works for Campbell Insurance Services, a broker licensed to the health exchanges in Maryland, Virginia, D.C. and West Virginia.

Currently the couple pays $1,053 per month for a plan to cover their family of four. Holly says a similar, ACA-qualified plan on the state-run exchange would be $400 more. “I’m going to keep what I have,” she says, “but I hear rumors the insurance companies will jack up grandfathered-plan rates big-time. They won’t be getting new healthy people in those plans.”

Michigan-based owner-operator Michael Wright and his wife are dealing with a few more question marks than the McCombs. After hearing the rates on his wife’s employer’s plan, which has covered their family for 25 years, could be going up 130% in 2014, he began investigating his options for ACA coverage on his home-state’s exchange. After providing information about age and place of residence, the system estimated the Wrights’ monthly premiums to range anywhere from $721-$1,634 for the “gold” level plans.

As you take on the task of sifting through your own options, here are some resources we’ve found that should help make some sense of the new law and present some options you might not be aware of:

Calculators

Overdrive magazine’s Todd Dills’ lists a couple of things to remember as you’re utilizing the estimating calculators below:

1) Your “income” figures will be based on 1040 modified adjusted gross income, estimated for 2014, not gross income.

2) The household-size and access-to-employer-based-insurance questions with calculators are all meant to take into account the entire household, not just the individual business. Owner-operators’ access to tax credits will be dependent on not only their own income but that of the entire household — if employer-based coverage is available and meets the affordability guidelines of the ACA, then credits will not be available. However, according to Ballard’s estimates, a majority, of owner-operators will likely fall into adjusted-income levels at which subsidies will be available.

Before You Sign that Lease-Purchase Agreement…

23572182_sIt seems like a smart move: don’t dive head-first into truck ownership. Sign on with a carrier’s lease-purchase program and ease into being your own boss, leaving the responsibility for the financing to the carrier.

But what happens too often is the driver signs on the dotted line without reading or understanding the contract. They trust what the company rep tells them and don’t get a lawyer to help sort out the details.

Unfortunately the contract is written to protect the carrier, who remains the legal owner of the truck until the driver has the title in hand. That means you have all the financial responsibility of truck ownership – maintenance and repairs – without any of the financial benefit of building equity in the truck.

And the risk of your truck loan being through the carrier (vs. a bank) is that you’re pretty much stuck with them. If they drop your miles or start charging you more for incidentals, there’s not much you can do.

Not To Say it Can’t Work

Lease-purchase deals have worked for experienced drivers who were careful about who they signed on with. In this Overdrive Online article, you can read about Andera Jackson, a Dayton, Ohio, trucker with 24 years experience, who is in a lease-purchase agreement with U.S. Xpress of Chattanooga, Tennessee, and close to owning a 2007 Freightliner Century.

His advice? “Know what you’re getting into. This is my third lease-purchase. I did two one-year leases before this one. It gave me insights into what’s going on.” He thinks the right program can be a great deal for a business-minded driver.

Most carriers are honest and don’t set out to fleece drivers, but know that you’re taking big risks with some of the agreements that are out there. Some things to investigate before you commit to a lease-purchase agreement:

Make Sure the Carrier’s Financial Health is Good

One risk, as Timothy Brady explains in this post http://www.cash4truckers.com/blog4truckers/2012/11/the-insanity-of-a-carrier%E2%80%99s-lease-purchase-program/, is that if the carrier goes bankrupt, no matter how many payments the driver’s made, he loses any stake in the truck and it goes on the block as one of the carrier’s assets to be liquidated. Investigate any company you’re considering. If it’s a publicly traded company, you can find their annual report on their website. If it’s not, ask the tough questions about long-term financial prospects and debt level. Research the company’s reputation in the industry.

Be Clear What the Company Is Paying For

Calculating what it’s really going to cost to take on a truck payment, you need to know what you’re going to get nickeled and dimed for. The Owner Operators Independent Drivers Assoc (OOIDA) points out that layovers, detention time, canceled loads, multiple drops and picks, insurance, permits – all these together start to take a big bite out of your profits. (Click to see OOIDA’s long list of questions to ask the interviewer when you’re searching for a carrier to lease with.)

Consider All Your Options for Financing

Allen Smith, founder of Truth About Trucking, explains that even though some lease-purchase programs work well, the failure rate is high for most participants. But these plans attract a lot of aspiring truck owners because they’re the easiest route. Problem is, if they’re making it easy for you, it’s unlikely to be the most economical route. Consider these other options that will be cheaper and make you less vulnerable to the whims of your employer:

  • Lease from a third party – You’ll probably get a better rate and you’ll be able to drive the truck for whoever you want. You will need to have decent credit and a down payment. Some may also offer a lease-to-buy option.
  • Finance your truck purchase through a bank or the Small Business Administration – You’ll need a down payment and good credit, but you’ll have the flexibility to drive the truck for any employer and if things don’t go well, you can sell the truck and pay off the loan.
  • Save up enough to buy a truck – this is probably the hardest way to go, but it positions you best for success. You’ll pay no interest, won’t be saddled with a house payment’s worth of debt and can leave a carrier’s employment without paying a penalty.

Do You Really Want to Own the Truck Offered?

If it’s been leased many times before, it’s probably not a vehicle you want to own – and probably this means the lease-purchase program itself should be avoided. Look closely at all the maintenance records. Be sure the truck’s mileage seems reasonable for its age. The carrier should have records of any recalls and when they were resolved.  If warranties are offered, study the terms.

Prepare for the Payoff

Lease-purchase plans for newer trucks often require the driver to come up with a large payoff to complete the agreement and take ownership of the truck. If you don’t prepare, you could make payments for years and have nothing to show for it because you can’t make that final payment.

Make Sure You’re Cut Out to be a Businessman

Even if the lease purchase deal seems fair and a good way to become an owner, take a step back first and make sure the truck-owning life is what you really want.

Small fleet owner and radio show host Kevin Rutherford says most people considering the move to being an owner-operator will list three reasons they want to do it: First, usually is “to make more money. Then it’s more ‘freedom’, ‘less hassle’, ‘fewer rules’. If your answers sound like these,” he says, “think again before you proceed,” because you’re likely to be disappointed.

According to Rutherford there are better reasons for taking on the additional work and away-from-home hours. Drivers who transition successfully to owner-operators are usually those who do so because they want the additional responsibility and challenges of being a business owner, and want to build a business that will support better lives for them and their families. Read the list of questions Rutherford suggests you ask yourself to further test your assumptions about being an owner-operator.

The Good, the Bad and The Ugly of EOBRs

truck at weigh stationA professional trucker for 30 years, Dick Pingel usually hauls sausage and cheese out of his home state of Wisconsin. He’s covered three and a half million miles in his career and never had a chargeable accident – and he’s pretty unhappy about the EOBR mandate.

Quoted in The Atlantic magazine’s article, Haulin’ Data: How Trucking Became the Frontier of Work Surveillance, he says, “They’re forcing me to put something in that’s not gonna help me any. And they keep saying, ‘Well, it saves you time…’ You know, I can do a lot. I can write up a log book in the same amount of time that it takes me to program what I’m doing into the EOBR.”

Pingel’s not alone. The move toward mandating EOBRs (a.k.a. electronic logging devices or ELDs) ranks high in the top five problems of both owner/operators and fleet-owners, according to polls by Overdrive Magazine and the American Transportation Research Institute.

The problems revolve mostly around their use being required by law and less around the devices themselves, which record driving time, manage HOS log data, and support driver log inspections.

The Bright Side of EOBRs

But unhitch the devices from the aggravation around the mandate, and it’s possible they could be a force for good, improving fuel efficiency, productivity and making logging a little easier. In the same Atlantic article, another thirty-year veteran of trucking makes the case for EOBRs. Cliff Downing claims that the device has benefitted him financially.

“My gross revenues have been up year over year, each year since using electronic logs,” he says. “Now is it due to electronic logs? Not the machine itself, it’s the efficiency that’s been forced onto us by the machine.”

Detention Time Leverage for Drivers?

Acknowledging his own resistance to the EOBR mandate lemons, owner-operator Henry Albert thinks drivers could make lemonade from the rule.

He believes that the FMCSA envisioned the fourteen-hour rule as a way to combat the detention issues that drivers face at the dock. The agency has no authority over shippers and realizes that detention time is a major fatigue issue. Albert guesses that FMCSA’s thinking is that if drivers had more limited ability to make up for delays caused by shippers and consignees, the practice of detaining drivers would be eliminated.

So far that hasn’t panned out, but Albert thinks EOBRs will further force drivers to watch their time – under penalty of law – which may finally force shippers and dispatchers to better respect drivers’ time.

Imagining a world where EOBRs are in virtually every truck, he says, “shippers would be calling dispatch wondering where their shipments are. Dispatchers would be calling drivers and asking, ‘Why didn’t you make it to your destination?’ Here’s the beauty…the driver would simply respond to dispatch saying ‘I was out of hours.’”

Who Does the EOBR Mandate Affect?

Drivers who must file a record of duty status (RODS) are subject to the rule as it currently stands. That totals  3.4-million drivers, including 1.7-million owner-operators according to this article on FleetOwner.com.

Where the Legislation Stands

There’s been no mandate finalized, but the FMCSA is expected to re-publish the rule in early 2014, after taking input on how to protect drivers from pressure to work in violation of safety regulations. Industry insiders anticipate a one- or two-year grace period before enforcement begins.

EOBR Options for Drivers and Fleets that Want to Get Ahead of the Mandate

By combining wireless technology and cloud computing software (software that’s accessed via the Internet instead of being installed on your computer), companies are now able to develop products that are much less expensive. On-board computers are no longer necessary, and special hardware can be replaced by a driver’s smartphone or tablet.

Versus the two to three hours installation used to take, it’s now done in five minutes. Christian Schenk, VP of market development and product marketing for XRS Corp predicts that when the new rule hits, there won’t be enough qualified techs to install the number of traditional onboard computers needed to handle all the demand. A brief install will be a nice advantage.

After the initial software purchase (which for example is $600 for the Turnpike product from Xata), monthly fees can be as low as $30. Qualcomm and XRS Corp also offer logs that can be used on smart phones and tablets.

Pitfalls to Look Out For

Certification – With the law mandating a device for such a large industry, the number of companies competing for the business will likely skyrocket – and a few years is a short time to have EOBR solutions ready to supply that will be truly compliant and meet massive demand.

How many of those companies will be able to manufacture a device that actually serves drivers and fleet owners in following the law remains to be seen. Whether or not the government gets into the business of certifying these devices, companies will need to do their homework on a vendor. “The key component is the company behind the device. The software is the easy part; the hard part is staying up on the regulations and changing rules.”

Data Transfer – How will electronically-logged data be transferred to law enforcement during an inspection? Transferring via a wireless connection is one option, or handing the device to the officer and letting him read it off the screen. Some suppliers are considering a USB stick, or sending info via the telematics provider, where the data would be transmitted to the provider’s server and then transferred to the enforcement agency’s system and then back down to the patrol car.   But all this is dependent on what’s compatible with law enforcement systems.

Steve Keppler, executive director of the Commercial Vehicle Safety Alliance: “Agencies don’t have a lot of money around to buy the newest technologies…The rule needs to be able to account for the differing levels of technology in the field.”

 

How Will Health Care Reform Affect You and Your Taxes?

This guest blog post comes from Esta Klatzkin, a tax and financial consultant who specializes in providing tax accounting and financial services to Owner/Operators, contract haulers, and other long-distance truck drivers in the transportation industry. Learn more about Esta and her company, kNOw TAXES, by clicking here.

It’s massive, and it’s complicated. At more than 2,400 pages, the Affordable Care Act (ACA for short) has left businesses and individuals confused about what the law contains and how it affects them.

The aim of the law is to provide affordable, quality health care for all Americans. To reach that goal, the law requires large companies to provide health insurance for their employees starting in 2015, and uninsured individuals must get their own health insurance starting in 2014. Those who fail to do so face penalties.

Insurance companies must also deal with new requirements. For example, they cannot refuse coverage due to pre-existing conditions, preventative services must be covered with no out-of-pocket costs, young adults can stay on parents’ policies through age 26, and lifetime dollar limits on health benefits are not permitted.

The law mandates health insurance coverage, but not every business or individual will be affected by this requirement. Here’s an overview of who will be affected.

For Businesses – It’s all in the numbers

  • Fewer than 50 employees

Companies with fewer than 50 employees are encouraged to provide insurance for their employees, but there are no penalties for failing to do so. A special marketplace will be available for these businesses, allowing them to buy health insurance through the Small Business Health Options Program (SHOP).

  • Fewer than 25 employees

Small companies that pay at least 50% of the health insurance premiums for their employees may be eligible for a tax credit for as much as 35% of the cost of the premiums. To qualify, the business must employ fewer than 25 full-time people with average wages of less than $50,000. For 2014, the maximum credit increases to 50% of the premiums the company pays, though to qualify for the credit, the insurance must be purchased through SHOP.

  • 50 or more employees

For companies with 50 or more full-time employees, the requirement to provide “affordable, minimum essential coverage” to employees has been delayed for one year and is not required until 2015. Originally, employers had been required to file information returns that reported details about the health insurance they provided, with penalties to apply if the insurance did not meet standards. Companies complained that they needed more time to meet the reporting obligations, and in response the IRS made the reporting requirement optional for 2014. Without the reporting, the IRS could not determine penalties, so the penalties also were postponed for a year.

Bottom line: the IRS is encouraging companies to comply in 2014 even though there are no penalties for failure to do so.

  • The business play or pay penalty

Starting in 2015, companies with 50 or more employees that don’t offer minimum essential health insurance face an annual penalty of $2,000 times the number of full-time employees over a 30-employee threshold. If the insurance that is offered is considered unaffordable (it exceeds 9.5% of family income), the company may be assessed a $3,000 per-employee penalty. These penalties apply only if one or more of the company’s employees buy insurance from an exchange and qualify for a federal credit to offset the cost of the premiums.

For Individuals – It’s all about coverage

Currently, attention is focused on the health insurance exchanges or “Marketplace” that opened for business on October 1. Confusion about the Affordable Care Act has left many people thinking everyone has to deal with the exchanges. The fact is that if you are covered by Medicare, Medicaid, or an employer-provided plan, you don’t need to do anything.

Also, if you buy your health insurance on your own and are happy with your plan, you can keep your coverage. However, the only way to get any premium-lowering tax credits based on your income is to buy a plan through the Marketplace.

  • The Exchanges (Marketplace)

Each state will either develop an insurance exchange (Marketplace) or use one provided by the federal government. The Marketplace will allow those seeking coverage to comparison shop for health plans from private insurance companies.

There will be four types of insurance plans to choose from: Bronze, Silver, Gold, and Platinum. The more expensive the plan, the greater the portion of medical costs that will be covered. The price of each plan will depend on several factors including your age, whether you smoke, and where you live.

Many individuals will qualify for federal tax credits which will reduce the premiums they actually pay. Each state’s Marketplace will have a calculator to assist individuals in determining the amount, if any, of their federal tax credit.

  • The individual play or pay penalty

If you’re one of the 45 million or so Americans without health insurance, you will need to get coverage for 2014 or pay a penalty of $95 or 1% of your income, whichever is greater. Low-income individuals may qualify for subsidies and/or tax credits to help pay the cost of insurance.

The penalty increases to $325 or 2% of income for 2015 and to $695 or 2.5% of income for 2016. For 2017 and later years, the penalty is inflation-adjusted. Those who choose not to be insured and to pay the penalty instead will still be liable for 100% of their medical bills.

Note: If you will be shopping for health insurance on the Marketplace, be aware that there’s no need to rush to enroll; the enrollment period runs from October 1, 2013, through March 31, 2014. Take the time you need to review your options and select what’s best for you and your family.

More About the Law and Your Taxes

In addition to the penalties required by the Affordable Care Act, the law made other tax changes that could affect you. Among them are the following:

  • Annual contributions to flexible spending accounts are limited to $2,500 (indexed for inflation).
  • The 7.5% adjusted gross income threshold for deducting unreimbursed medical expenses increases to 10% for those under age 65. Those 65 and older can use the 7.5% threshold through 2016. The additional tax on nonqualified distributions from health savings accounts (HSAs) is 20%, an increase from the previous 10% penalty.
  • The payroll Medicare tax increases from 1.45% of wages and self-employment income to 2.35% on amounts above $200,000 earned by individuals and above $250,000 earned by married couples filing joint returns. This rate increase applies only to the employee portion, not to the employer portion.
  • A 3.8% Medicare surtax is imposed on unearned income (examples: interest, dividends, capital gains) for single taxpayers with income over $200,000 and married couples with income over $250,000.

The Affordable Care Act may be one of the most complicated and confusing laws ever passed, but one thing is very clear: the law will affect the taxes of most Americans. In order to manage your tax bill, you will have to factor the new health care rules into your overall personal and business tax planning. For guidance, contact our office at (818) 345-7456.

To begin checking out your state’s exchange (Marketplace), start at www.healthcare.gov – the federal government’s website on the Affordable Care Act.

NOTE: This Memo is intended to provide you with an informative summary of the tax issues connected with the Affordable Care Act. This massive package of legislation contains varying effective dates, definitions, limitations, and exceptions that cannot be summarized easily.

You’ve Just Inherited a Truck. Sell it or Hire a Driver?

That’s the question posted over on TheTruckersReport.com forum. The resulting thread includes 62 responses and gets into all the nitty gritty of insurance, business plans, lease/purchase vs. owning, profit margins, how many cents/mile you’d need, maintenance expenses, how much to pay employees, what benefits to give them, and on and on.

Survey Says….

The consensus seems to be that for the hard-working, business-minded individual, hiring drivers, while risky, can pay off in the long run.

One driver, who claims to own 15 trucks and net $110,000 a year, chimed in with the following comment: “I went door-to-door at every business in my town with my portfolio of my ideas and found a local business that needed my services. I’ve dedicated my entire fleet to hauling just their product – which cut out having to deal with brokers.”

It Could Be a Very Bumpy Ride

But this fellow, who identifies himself as “Sled,” may be one of the luckier ones. According to the National Assoc of Small Trucking Cos (NASTC), the failure rate of small, start-up trucking companies is about 85%. Only 15% make it to the second year of operation.

NASTC offers training to help aspiring fleet owners beat the odds. On their website you can find more info about their training.

On that page you can also find a list of about 20 questions – just the tip of the iceberg as far as the kind of business planning you’ll need to do: How do you plan to find freight? Where do you plan to run? How will you find insurance? How are you going to keep the books? How are you going to do log audits, fuel taxes, and driver qualification files? How are you going to manage and interpret data and information?

Getting More than the Going Rate: the Secret Sauce is Customer Service

There’s easily a hundred details to work out and a hundred smart decisions have to be made, but before you get overwhelmed, there is a trick of the trade that can improve your chances: great customer service.
According to this article in Heavy Duty Trucking magazine, working smarter, not harder is the key. And the smart way to work is to focus your effort on building great relationships with your best customers. Earn trust by going above and beyond, and the good customers will pay more than the prevailing rate.

The Small Fleet Advantage

In fact, small fleets are in a better position to go above and beyond for their best customers, says Keith Tuttle, president of Motor Carrier Service Inc. of Northwood, Ohio. “We do many things for our customers that the huge carriers cannot do,” he says. “We put a service moat around them to keep others out – the specialty stuff, the last minute calls, the weekend stuff. The idea is to make the customer look good to their customers, and they will keep coming back.”

Rich Hernandez of Mustang Express in El Paso – also quoted in Heavy Duty Trucking – attributes his success to “reliability and transparency” with his customers. He says, “I can’t haul every load, but the customers who trust me with their freight know I’ll be there when I say I will, and if something goes wrong, I’m on the phone working it out. I believe they appreciate my honesty and effort, because they keep calling back.”

Focus on Priority Customers

Hernandez some customers are always shopping for rates. He gives them the best service he can but when he has to prioritize, they aren’t at the top of his list. “I look after my good shippers and take care of the rest as best I can,” he says. “The key is knowing the difference.”