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The Ultimate Year-End Tax Planning Checklist for Transportation

By John Valle, CPA | Principal, Transportation Leader | | Twitter: @valle_CPA

Click here for the print version of the Transportation Year-End Checklist

Year-end is here, and while 2019 closes and another decade begins, it’s time for brokers, carriers, and owner operators to proactively plan for 2020.

Year-end is more than just preparing financials for the upcoming tax period; it’s a key time for business owners to evaluate the health of their company and make appropriate changes for the following year. It is also important for tax minimization strategies before the year is over. Allocating adequate time to review key considerations for a business’s wellbeing properly will result in a clear strategy for the forthcoming years ahead.

With the tax reform changes still taking place from the 2018 implementation, many business owners are still discovering applicable changes to their industry, and transportation is no exception. The most extensive overhaul since the tax reform act of 1986, the most recent changes can impact trucking and transportation significantly. Partnering with an educated accountant helps businesses identify tax reform opportunities.

The transportation industry is also unique as most carriers and brokers travel across multiple state lines. Tax planning is confusing enough in one state, let alone multiple, even if the driver didn’t physically leave the truck in a state and simply drove through. An experienced accountant can help owners evaluate the multi-state tax exposures that may exist, based on whether the transportation business has a Nexus in that particular state.

One of the biggest questions under the Tax Cuts and Jobs Act from 2017 for carriers and fleet owners is whether to buy or lease trucks under the new tax laws. What is the best option for fleet or truck owners? The answer is dependent on many factors affecting the business, including the cash flow of the business and the tax structure. One company may opt for a lower payment, if available, over the tax considerations. Another company may have significant tax liabilities and is looking for a way to minimize taxes.

Before ringing in the new year, take the time to review the following checklist of critical items to discuss with a CPA experienced in the transportation industry. If a topic on the list isn’t familiar, be sure to examine with a tax adviser for optimal planning.

Year-end planning considerations:

  • Revenue recognition and lease accounting requirements for Financial Reporting – The deadline is quickly approaching for private companies effective January 2020
  • Shoring up the balance sheet for December 31st for upcoming financing opportunities – Review financial ratios – banks and other lenders look at the December 31st balance sheet for the coming year financing opportunities
  • Evaluating tax structure – C-Corporation, S-Corporation, Partnership or Sole Proprietorship – With the recent Tax Reform changes, the company’s tax structure could be modified for significant tax benefits.
  • Maximizing the 20% Section 199A qualified business income deduction for pass-through business owners
  • Evaluation of accounting methods for tax purposes (Cash vs. accrual methods)
  • Buying new equipment/trucks for a full tax write off under Section 179/Bonus Depreciation
  • Maximizing deduction of business interest expense under the new limitations 163J
  • Deferring income or accelerating deductions for tax bracket, deduction, or credit planning
  • Evaluation of multi-state activities for tax compliance
  • Review of retirement plan contribution options
  • Self-employment tax planning
  • Succession planning – Is there an exit strategy to maximize enterprise value, a planned retirement, or an emergency?
  • Evaluate eligibility for tax credits (Including R&D Credit and Work Opportunity credit)

Don’t tackle the year-end checklist alone; partnering with an experienced accountant dedicated to the transportation industry positions companies for growth in 2020 and beyond.