Freight 360

Taxes, Carrier Partnerships, and Broker Transparency | Final Mile 78

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Nate Cross & Ben Kowalski answer your freight brokering questions and discuss:


  • Freight Broker Taxes
  • Building a Carrier Network
  • Broker Transparency

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Speaker 1:

All right, it's another edition of the final mile where we answer your questions and respond to your comments. I honestly hope that the Bills have won the AFC championship, because I'm recording this the week before this releases and I have no idea how this game ends. But anyway, we got three questions today. Before we get into them, please, as you have been, continue to share us with your friends and colleagues in the industry or anyone interested in freight brokerage. Check out Freight360.net for our full searchable library on the website and you'll also find the Freight Broker Basics course for a full-length educational option. And while you're listening or watching us, please check the comments or, I'm sorry, the description or episode show notes section to see our sponsors to help support this channel.

Speaker 1:

All right, our first question it's tax season. We get this one every year. This was a YouTube comment. I tried to kind of clean it up to make it to the point. But when it comes to sending 1099s, what's the difference between contractors versus carriers? All right, so, as you may know, if you pay somebody over a certain dollar amount per year as a contractor, you have to send that person a 1099. So, like if you're on the receiving end of that, like if you're an agent or you drive for Uber or whatever the case might be, you'll get a 1099 that says you earned X amount of money this year. It's a way of being able to report to the IRS the expense on the person who paid its end and also the earnings on the contractor's end, versus a standard employee-employer W-2 situation.

Speaker 1:

Now people have often asked do I have to send every trucking company a 1099 that I paid to contract for a load? And the answer is no. There is an exclusion in the IRS clause and we literally pulled it up two years ago and read it verbatim. As it stands now, while the IRS still exists, there is no need to send 1099s to your carriers that hauled loads for you to send 1099s to your carriers that hauled loads for you. Again, there's always possibility of changes in tax law. Check with your tax professional when it comes to this stuff, because if you're watching this two years from now and it's changed, I can't help you. But yeah, you can't. I mean you don't have to send a 1099 to all your carriers. If you have agents, yes, you need to pay or send them to your agents. Anyone else that was contracted anything else on this one ben I think just nothing to add in general right what any unit tax tips.

Speaker 1:

You've been on the w2, the 1099, the k1. You've been on like W-2, the 1099, the K-1. You've been on like every little, every tax corner of this industry.

Speaker 2:

Any tips you got. I've been in multiple at the same time. Yeah, no, I mean honestly, like the one tax tip I would say for anyone out there that has saved me the most time is I. If you have businesses and business bank accounts, I, if you have businesses and business bank accounts, just use separate debit cards for all of your purchases in a way. That just makes it so much easier at the end of the year.

Speaker 2:

Like I've got two businesses, there's a bank account for each one of them, so if I got to make purchases or any expenses related to this business, it just goes out of that card.

Speaker 2:

So then I don't have to unwind or figure that out at the end of the year. I just send my account, each of these bank statements, each of these accounts, and they can see and classify all of that. I think that is one of the biggest time savers. And the other thing is, if you don't have business bank accounts, you can still set up a credit card and just use it for that business and then at the end of the year, as long as you only use that credit card for that business, right, it's a lot easier for reporting and being able to figure out where your expenses went. It is a nightmare to try to do this all out of like. If you had one credit card and one personal bank account and you're doing business and personal throughout the year, it will take you weeks to try to unwind, figure this out and classify it and like that was probably like the biggest time saver.

Speaker 1:

Yeah, I, I would. I got to. One is what you just said separate your personal and your business, cause I mean we do it with freight 360, right. At the end of the day, our bank statement becomes just the profit and loss statement.

Speaker 1:

I mean, like, whatever money that came in and the money that went out is expenses Right and like whatever money that came in and the money that went out is expenses Right, and then you know. But the other part is and we do this on Freight 360 side as well as well as my personal side Pay a good accountant, like pay someone who knows the tax laws, so you're not missing anything. We're not looking for someone to like skirt the laws and, you know, cheat the system. But don't leave anything on the table. If it's in the tax code and you're eligible for it, you should be taking full advantage of that opportunity. Ok, whether it's a child tax credit or a, you can write off a business expense or whatever Like.

Speaker 1:

For me, one of the things that I get to do for National Guard is if I'm traveling over a certain distance and it's not reimbursed by the, by the army, I get to claim mileage deduction Like and that's a, that's an exemption. That is above and beyond anything else. It's just for reservists and National Guard folks in the in the service I am absolutely every, every month, every year. I track every freaking mile that I drive and whenever I pay for lodging or food out of my own pocket that's not reimbursed, I'm definitely taking federal deductions on those and I track them detailed For brokerage purposes. Well, I guess for Freight360 more so, like anything that we do or spend as a company, the company is paying for, so that it is not seen as a? Uh, it's seen as an expense and not tax, like and we've got a?

Speaker 1:

Um, a good accountant that every year he'll come back and he might ask questions like hey, here's what I got here. Does this line up like? They're a second or, in our case, a third set of eyes? That is, you know, that's what they're an expert at. And I have the same with my accountant that does all my stuff with my, my wife, and I pay the pay, the money to have someone pay, you know, do it all for you. Instead of being like, yeah, I'm going to spend 10 bucks and go to TurboTax or whatever, you might spend a couple hundred bucks and find out that you're going to save even more than that because you had the right person helping you out. That's my additional take on tax.

Speaker 2:

I couldn't agree with that more. Like I have an accounting major and like I did my taxes before, but like also the thing that changes, like if you're really operating a business and like especially if you're living off of it and it's paying for, like you, to survive, however you define that right. Like I think you're at the point where, like you for sure, should be paying an account because the tax code changes to your point what was there last year is different from this year, it changes every year, it's updated and you're likely leaving a lot of money on the table not letting a professional do this yep, all right.

Speaker 1:

Next question this is a in reaction to our uh, we had a. We talked to some extent about cold calling carriers and someone said well, how do you cold call carriers? Um, it's the same, the same way you would cold call a shipper, the difference being your reason or your, your value add or approach to it has a different angle. Right, when you're reaching out to a shipper, cold calling you want, like the what's in it for them tends to deal with capacity, maybe the, the cost of that capacity, just the availability of that capacity. When it comes to a carrier, what's the what's in it for them usually involves freight, ideal freight, good paying ideal freight, good dealing, I, good paying ideal freight that is, quick load, quick unload, etc. Right, um, and I think the way that you go about this typically is similar to what we talked about on the podcast last week is like, hey, I don't know if we're a good fit. I was, you know, here. I know you guys are located here. Here's the kind of equipment that you guys are showing that you have. Um, what lanes are you guys normally running? I've got some options here for um, a customer dedicated freight going from here to here. Do you guys ever run that lane.

Speaker 1:

You're just having kind of like a um exploration type of phone call. You're kind of like a exploration type of phone call. You're kind of like getting to know one another. What do they run, how often do they have available assets type stuff like that? What's most important to them? Are they chasing the highest paying stuff or do they have drivers that are committed to them but want to be home every single weekend? It's the same way you want to understand what's important to them. Where do they operate, when do they operate, when do they have some available, etc.

Speaker 1:

But again, it's a lot of phone calls to a lot of different carriers.

Speaker 1:

It takes time and if you don't take notes and record what the preferences are for these folks, you wasted your time.

Speaker 1:

So it's kind of the same way you track your notes on a CRM for shippers, do the same thing in your carrier database, maybe in your TMS or somewhere else. But one of the ways so I actually helped somebody with this a couple of weeks or last week yeah, we identified like seven or eight lanes that were very difficult to find capacity in. I did a mix of gen logs, highway dat directory and I think those were the three that I started with and I ran like the top preferred carriers that met all the criteria in those lanes and, um, you know, I basically we set this person up and said, hey, uh, you can email them if you want, but expect to cold call these carriers the same way that you would a shipper introduce yourself and, um, you know, have a conversation about the, the business you have coming up that may be a good fit for them. So, um, it's the same thing with your lead gen and then you're prospecting, so you have to find the carriers and then talk to them.

Speaker 2:

What do you got on this one, I I mean, yeah, the biggest things that I would say is one ask a lot of questions to understand what's important to them. One approach it like a partnership, because that's really what it is, approach it from a long-term relationship standpoint, not a transactional standpoint. And the last point is what you said is have some way to keep track of this information so that you can sort it and go back and find the carriers and the information that they gave you. Because I can't tell you how frustrating I had, like my first year in brokerage. I'd talk to carriers, I'd write this down in notepads and I had stacks of full notepads on my desk. And then I'd talk to a shipper and I'm like I know I had a conversation with a carrier that fits this lane.

Speaker 2:

I'm like I can remember it, but I can't remember the MC and I can't find it in my notepad and I would just be flipping through my notepad trying to find that lane and I'm like this is ridiculous. Like I did the work. I've seen people use Excel, google Sheets, a CRM, a TMS. It doesn't matter what you use, it just matters that you can go back and find that lane and then find the carrier. Because if you got to sort through every carrier and then read the notes to find the lane. It's not helpful. You need a way to go back and search by lane and then find the carrier that actually wanted or needed to work on that lane.

Speaker 1:

I will say and this is one of the things that I actually do like about McLeod, as much as I have my quarrels on it is, mcleod has a really good carrier lane. You can insert or, I guess, add the preferred lane in their profile and then there's an auto auto tendering process where you can create a waterfall where you say, hey, you know, you can build a routing guide, right. So for this specific customer's lane, here are the 10 carriers that I either manually want to add in or it'll search the system and say, hey, you've identified that this carrier prefers these States or this lane, whatever. And then you can um It'll, you know, write a tender, this load and email the first one. If they get a response back, yes, you book that carrier.

Speaker 1:

If not, or if certain time expires, it moves on to the next one and the next one it's a routing guide. The same way that shippers have a routing guide, you can build one in a TMS. So if you don't have that in your TMS, a spreadsheet will often do the job. You might have a list of the carrier, a list of if they prefer certain states or whatnot kind of create your own little tracker.

Speaker 2:

I would add this too, and this is why this is so valuable, to have these conversations. Most of the sourcing platforms like we'll pull factoring data and they'll give you the lanes that carrier runs. Okay, great, you know that carrier ran that, but a lot of times that carrier already has loads on that lane. What you really need is the information for them to tell you I don't need Sacramento to Denver every week. I have that load or whatever. I need Denver to reposition me to Georgia for my next load, and that data usually doesn't show up in the same ways. I mean, there are ways that some platforms do this but like that's why a conversation is so valuable and really does help you build a partnership and a relationship with that carrier to do consistent business. Cause now everybody wins the carrier wins, the broker has less time covering that load every week, the shipper has less service failures because the carrier actually fits that lane. Based on those days when you can do this right, everybody wins and everything gets more efficient.

Speaker 1:

All right. Lastly, here is a fairly lengthy comment on broker transparency, but I wanted to read it. All right, here we go Broker transparency. Many owner-operators want to know how much the broker makes In their defense. Shippers know how much they pay gross to the broker. Brokers know how much they pay gross to the truckers. Truckers want to know. Owner-operators have expensive investment and expenses in the business. However, it is really really hard to become a broker skillful and professional broker, I mean. It takes time and unbelievable effort to find shippers and build relationships and if you are a business owner who survived hard times, you should understand. It's not about transparency. It's about the way you run your own business, from rates you get to full management of your assets and ability to find opportunities around your operations.

Speaker 1:

I don't remember anybody talking about the transparency during the COVID bubble. Instead, everybody ran to get that truck to make money. Guess what bubble exploded. Bank accounts drained, bankrupt, poor management. As a human, I want to know how much the broker makes. As an owner-operator, I really don't care. I focus on my business, not someone else's, and I learn from brokers. I wonder how much the shipper makes dot really don't care. I focus on my business, not someone else's and I learned from brokers I wonder how much the shipper makes dot dot dot. So very good point here, and I really like this take because it's a.

Speaker 1:

It's a realistic take from me. I'm a. He said he's an owner operator. Right, you're right. The covid bubble there. Like everyone knew it was expensive to get a truck and no one was asking carriers how much are you making on this? It was supply and demand. We knew if we wanted to get that truck, we had to pay for that truck and it is what it is. Um and the, the transparency thing, uh, yes, as the, as the middle person of the transaction, we're going to know both sides of it. Any broker in any transaction is going to have knowledge of both parties on on either side. It's kind of their purpose is the yes, one party doesn't know what the other party is making or paying or whatever it's. The broker brings the two together. So I guess you have the exception in like real estate, where it's a predetermined commission percentage.

Speaker 1:

But yeah, do you have any take on that? I just I was, I was refreshed to hear this take from someone on the carrier side.

Speaker 2:

And the thing I want to point out, like I don't want this to be critical, but like the shipper doesn't make money on shipments, it's an expense and they don't want to pay anything.

Speaker 1:

It depends, man, if you get some. You get some of these ones where they're, they've got a set they get their customer. Transportation costs that they charge their customer.

Speaker 2:

Right.

Speaker 1:

If they can get it for cheaper than that, they could make a little money on it.

Speaker 2:

I've seen it happen.

Speaker 1:

And I would say like right.

Speaker 2:

For the most part, and also like, and also like. I mean you can see contract rates and that carriers can see what the going contract rate is Like. They can see what shippers are paying directly to carriers and they can see in the spot market what their average paying to the carrier side Yep, Like and you can see the difference. The Delta between those two right Like that gives you a lot of that information.

Speaker 1:

It's within about 20 cents a mile right now.

Speaker 2:

last I checked, so they're getting really, really close to matching back up Right around the corner.

Speaker 1:

Yeah, anyway. Good conversation, good questions. Keep them coming our way. Yeah, hopefully the Bills won, and I'm not looking like a fool right now. I'm pulling for you, buddy. What's that I'm pulling for?

Speaker 2:

you. I'm not looking for you, buddy.

Speaker 1:

What's that?

Speaker 2:

I'm pulling for you. I'm looking forward to it.

Speaker 1:

Yeah, all right. Final thoughts.

Speaker 2:

Whether you believe you can or believe you can't, you're right.

Speaker 1:

And until next time go Bills.

People on this episode

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Benjamin Kowalski

Co-host
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Nate Cross

Co-host