truck driver

[oceanlovin'ea]

Client started a business last year. She works for a trucking company and she does some office work but mostly her husband drives a truck for them....long distance driving.

He retired and is on Social Security, age 64. She is paying him as a sub contractor. So they wanted to keep his income down for the next couple of years. So she paid him $100 per week for a total of $1200 for the year. She has checks she has written to him for those amounts.

He was on the road 150 days last year. She really underpaid him but wasn't sure what to do.
He can use the per diem rate since he was on the road. But this will give him a large loss on his schedule C.

She needs to up his wages for this year and she will. But is there anything that we can do to increase his income for last year. We have not filed the 1099-misc yet. The amount could be increased.

Linda, EA

[Jiggers]

Client started a business last year. She works for a trucking company and she does some office work but mostly her husband drives a truck for them....long distance driving.

He retired and is on Social Security, age 64. She is paying him as a sub contractor. So they wanted to keep his income down for the next couple of years. So she paid him $100 per week for a total of $1200 for the year. She has checks she has written to him for those amounts.

He was on the road 150 days last year. She really underpaid him but wasn't sure what to do.
He can use the per diem rate since he was on the road. But this will give him a large loss on his schedule C.

She needs to up his wages for this year and she will. But is there anything that we can do to increase his income for last year. We have not filed the 1099-misc yet. The amount could be increased.

I am confused.

"Client started a business last year". What does that have to do with her husband driving a truck for some company?

"She is paying him as a subcontractor". Who is paying him? Your client or the trucking business that she works for?

And a really big question, why would a business owner underpay someone and miss a deduction and have to pay income tax on that missed deduction so that someone else can qualify for SS benefits?

[Burke]

It sounds as if the meager stipend he was paid would not even cover his meal expenses (per diem) so I would forget that deduction altogether. All of it could be attributed as reimbursement of his out of pocket expense for the "job." However, if she paid him up to the $14,160 he could earn in 2012 and not pay back his SS benefits, it still might not cover his per diem for 150 days or more if lodging were involved. I don't see how they can go back now and arbitrarily report income he did not receive for 2011. I, too, am confused about how exactly this company is structured. And why he would not be considered an employee. Who is paying for the fuel? Does he own the truck, or the company?

[joanmcq]

And what about minimum wage laws?

[ChEAr$]

And what about the rule that truck drivers are not independent contractors?

[Gretel]

And what about the rule that truck drivers are not independent contractors?

Rule? If a T/P owns the truck than he is self-employed, isn't he? Some trucking companies in my neck of the woods required previous employees to purchase their own truck or leave.

[Jiggers]

Rule? If a T/P owns the truck than he is self-employed, isn't he? Some trucking companies in my neck of the woods required previous employees to purchase their own truck or leave.

True. But what about any operating expenses? None is mentioned and it isn't cheap to run a truck.

Sounds like some business is misclassifying an employee as a contract laborer.

[taxmandan]

"He retired and is on Social Security, age 64. She is paying him as a sub contractor. So they wanted to keep his income down for the next couple of years. "

They are trying to game the system but aren't bright enough to do it successfully. This is someone I would send down the road (pun intended) and would not prepare their return.

[oceanlovin'ea]

ok. let me clear up my original post.....sorry I didn't make sense when I posted it.

Wife started a business near end of 2010...really got going in 2011. She contracts from Company A to provide trucking service for them. Her husband will drive company A's truck. (He was a long distance truck driver before he retired). Wife will do all paperwork and a few other office details for company A. They pay her. The business is in wife's name. She will employ or contract with husband for truck driving.
If he worked for company A he would probably go over his limit as what he can earn with social security. So wife was just going to pay him per week when he was out on the road.

Problem is that she only paid him $1200 last year. $100 on 12 different occasions. He should be able to use the per diem rate for his expenses on the road....meals only. Usually sleeps in truck. He was on the road 143 days. To say she underpaid him is an understatement.

I am just trying to figure out how to handle this for 2011. She will do things correctly in 2012. We will discuss for sure. We talked about it when they were in last year. But I had no idea the amount of income she would have, what she was paying him or how long he was gone.

Is this any clearer? If not, just let me know and I will try to be clearer.

Thanks

Linda, EA

[ChEAr$]

Rule? If a T/P owns the truck than he is self-employed, isn't he? Some trucking companies in my neck of the woods required previous employees to purchase their own truck or leave.

Gretel, mein liebschen, the OP never mentioned that the husband owned the truck.

[ChEAr$]

ok. let me clear up my original post.....sorry I didn't make sense when I posted it.

Wife started a business near end of 2010...really got going in 2011. She contracts from Company A to provide trucking service for them. Her husband will drive company A's truck. (He was a long distance truck driver before he retired). Wife will do all paperwork and a few other office details for company A. They pay her. The business is in wife's name. She will employ or contract with husband for truck driving.
If he worked for company A he would probably go over his limit as what he can earn with social security. So wife was just going to pay him per week when he was out on the road.

Problem is that she only paid him $1200 last year. $100 on 12 different occasions. He should be able to use the per diem rate for his expenses on the road....meals only. Usually sleeps in truck. He was on the road 143 days. To say she underpaid him is an understatement.

I am just trying to figure out how to handle this for 2011. She will do things correctly in 2012. We will discuss for sure. We talked about it when they were in last year. But I had no idea the amount of income she would have, what she was paying him or how long he was gone.

Is this any clearer? If not, just let me know and I will try to be clearer.

Thanks

Linda, EA

Just as I thought, neither she nor husband own the truck.

Still though, her husband is HER employee, common law employee to boot, and gets
a w2 form (or should) from his wife.

However, assuming his W2 is for 1,200 only. It boggles the imagination to see him claiming 50$ something dollars a day for being out of town. No sane person would work for those conditions and go in the hole for meals.

[Jiggers]

Just as I thought, neither she nor husband own the truck.

Still though, her husband is HER employee, common law employee to boot, and gets
a w2 form (or should) from his wife.

However, assuming his W2 is for 1,200 only. It boggles the imagination to see him claiming 50$ something dollars a day for being out of town. No sane person would work for those conditions and go in the hole for meals.

Agree, Harlan.

Interesting that the wife now has to report the income she was paid for her business, take a tax deduction for $1,200 only for wages paid to husband.

Probably cost them more in taxes. Brilliant tax planning.

Just a sham.

[oceanlovin'ea]

not so smart

Ok, these people were not too smart last year. Is there anything I can do to help them.

I am not going to put $1200 of income and $6500 of expenses on a schedule C for him. That would be such a red flag for an audit.

I could make it wages and go back and do the payroll reports for 4th quarter. But what would I do about his expenses on the road. I don't know if he kept receipts or not.

My brain is not operating right now....need food....need food....need caffeine...

If you have any suggestions, let me know. I'll revisit this a little later.

Linda, EA

[Lion]

$8

So he made about $8 per day before expenses. The IRS could say HOBBY. Would a reasonable person continue to contract to drive a truck, even for his wife, for only $8 per day? He must've really wanted to be away from home!

[Gretel]

I don't know of anything to make this a good deal. If employee, which of course he should be, then his biz expenses go on Schedule A. Depending on their other itemized deductions this might be a mute point.