Motor Carrier Deception, Hazmat Hauling, and 1099 Tax Tactics | The Final Mile #28

Freight 360

January 30, 2024

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

  • Burner MCs
  • Highway vs Carrier 411
  • Produce Claims
  • HazMat Loads
  • 1099 Taxes
  • Customer TMS Platforms

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Show Transcript

See full episode transcriptTranscript is autogenerated by AI

Speaker 1: 0:19

All righty. Welcome back for another edition of the final mile, where we answer all of your questions. Keep sending them to us. We've got six good ones today. Please take a moment and check out the description box and support the sponsors. We recommend their products and services and we recommend you know. We encourage you to check them out and if you'd like to learn more about us, go to freight 360 net. You could check out the freight broker basics course to learn Everything you need to know to start a brokerage, get customers and grow it successfully. All right, let's get into it, ben. First question In regards to carrier vetting what is a burner emcee? I'm gonna answer this First thing is.

Speaker 2: 1:05

I want to go with the analogy. I started watching the wire again. I don't know if you ever saw that show in HBO from like 20 or 30 years ago, but it's like burner phones. It relates, yeah, like why do you use them? Because you can throw them away and there's not much risk to them and you're not associated with it? Yeah, exactly, take on what that probably means.

Speaker 1: 1:23

Yeah, and the same. The same goes for burner emcee. I actually I he, I don't hear it called burner emcee as much with that's probably. That's probably one of the most clever ways to you know to title it, because that's exactly what it is. What I would call it is it's basically a stash of a bunch of like fraud emcees. Well, they're, they're legit, but they're intend to be used for fraud. So what some of these scammers will do is They'll go out there and they'll pay to get 50 different authorities Right. It's worth it for them to pay $300 for every single authority because they're gonna scam somebody for Hopefully 30 grand before they get busted. Right enough, people get scammed for double brokerage. Quick pays and boom, the emcee gets reported. They stop using it, fall face to the earth. Hence it's burned burner, right. So that's what it is. Like any other vetting, I mean, this is still just kind of well. Actually, I'm gonna roll right into the next question, cuz it's gonna relate to it.

Speaker 2: 2:28

Well, the first one, right, yeah, okay, yeah, you're right.

Speaker 1: 2:31

Second one you know how do you identify Right, so like? The next question is about should I use highway instead of carrier 411 or should I use them together? I Personally only use highway. I don't use carrier 411 anymore. I didn't. I think highways value overall is it includes and goes way beyond the effectiveness of carrier 411. You won't get those freight guards that 401 has, but you will get TA watch job reports and highway has its own reports for fraud. Yeah now, how would I identify a possible burner emcee? Well, if I'm vetting them out and they have no inspection history and they have been in business for one month and they're located in Glendale, california or any other known hotspot, and and fill in the blank on all the other red flags for these fraudsters out there PO box as an address Never been accessed from within the United States, if you get any of that kind of stuff, you know, treat it like any other fraud or potential risk. Right, go, because there is a slight chance that it's not a double broker, because, just because they're brand new, but you know, go through all the challenges You're gonna require them to do every little SOP or you know, standard operating procedure that your company has in place so that you have in place to vet cares out. I want to. You know you're not gonna receive a pick up number from me or a full address for my customers location Until I verify that you have enabled GPS and you've taken a picture, a selfie, of you in front of your truck showing the name and MC number, you know. You know there's different challenges you can use. Or if you, if you have highway and you have their, their Highway connect version. You can have them ELD connect, you know and verify their location that way. There's like all kinds of ways to do this. But I could tell you right now if somebody's trying to scam you and they're using a burner MC, you start to challenge them. They're not gonna deal with it. There's gonna move on to the next weak person.

Speaker 2: 4:34

So Agreed I. My favorite, my favorite Verbiage is hey, my customers had a bunch of fraud and double brokering over the past year. So they want to know at least make and model on color of the vehicle we're sending in. So you just confirm what, what kind of truck we're actually sending in a freight liner, what color is it? And sees on the side. Because the guy at the shipping dock is always gonna check to make sure whatever I send him is what shows up. Otherwise don't reject him. And again to your point it's easier for somebody trying to commit fraud to just go to an easier target than to try to go through that scenario and what normally happens they won't say anything. Just 15 minutes later You'll get a phone call or an email. Truck can't make. It broke down or fall out. And you got your answer right? Yeah, for sure.

Speaker 1: 5:22

Next up. If the if freight or produce specifically is damaged in route due to an accident and the receiver rejects the entire load, can you call for USDA inspection? Can it be salvaged? There's a lot of it depends when it comes to this. So, usda inspection if, if a if there's gonna be a claim on Food product, you're gonna usually always see a USDA inspection ordered and they're not very difficult A lot of times that these big facilities they just hang there, they're already on the dock and they'll come and do their their inspection. But it is really important to get a USDA inspection done because now you're gonna have a third party Give their like very objective report on this. There's no like bias here, it's very objective. They're gonna say, okay, this commodity is, you know, 8% damaged or 100% damaged. I mean, check out some of our blue they're quantified Videos to go through this. But like, yeah, they quantify it, like they will tell you exactly what it is. Because they're gonna take that in conjunction with the value of the goods from like a bill of sale and they're gonna figure out what the claim's worth Now salvaged. That's another good question here, because sometimes they can salvage a portion of the goods and I actually saw this happen recently with produce where some of it was able to be salvaged. Now, what do you do with what's left over, which was not asked, but it's a good question. Sometimes the receiver's just like I don't care what you do, just get it out of here. But a lot of times they will tell you like hey, there is a food bank that will happily take this product. It doesn't meet our standards for our customer to put it in a grocery store, but it is still edible and you can go donate it to a local food bank and they'll tell you where to go. Some of them are like just go dump it, I don't care where it goes, just dump it. So it's a good question to ask and clarify. But if there's any salvaging being done, that salvage is gonna save a percentage of the claim. So it's not a full law. So that's good stuff. That's why the USDA inspection is important, because imagine that as the carrier or the receiver's like no, I'm not taking any of this, I'm rejecting all of it. But the reality is like it's not all bad, you could sell it. Can you sell any of it? What's?

Speaker 2: 7:51

that, If your receiver doesn't have somewhere or doesn't have a suggestion, are there any other options or places to call to try to get any value out of it other than donating it? What would be your next option?

Speaker 1: 8:05

If it was you, the two big ones I often hear is like donate or throw it out somewhere, like find a place to go throw out you know 20 pallets of frozen onions or something. It's wild man. I'm trying to get a situation where we didn't know. We've had plenty of situations where we couldn't get a clear answer and it was back and forth and lack of communication. But at the end of the day somebody told us what to do with the product or where we could go with it. But like I've seen them before where the receiver rejects it and if there's no USDA inspection done on it, the insurance company on the carrier side can be like well, I did everything right. Here's my temp recorder on my reefer unit. Here's the pictures that you know. Here's how it was loaded. It was, I didn't do anything wrong and they're insurance company might deny it. That's why it's like really important to cross your T's and dye your eyes on this stuff, cause we talked about this with the TIA coaching earlier. You could have, and we've talked about with Blue Book, you could have a bad actor shipper trying to pull a fast one, cause they've got-.

Speaker 2: 9:21

It doesn't necessarily have to be bad or intentionally right, like it could just be negligent. Could be a new person at the dock that just. You know. Something happened they forgot to pre-cool the commodity long enough, thought they did it long enough and they were new. They did it an hour. It needed to be four hours. Right, it could be a lot of different reasons. Right, it doesn't have to be, you know, malicious intent or somebody's trying to screw somebody else over, like there's lots of things that can go wrong.

Speaker 1: 9:48

But good question Next up what kind of pricing difference is there between Hazmat and non-Hazmat van loads? Actually, well, this is about van, so I'll speak to LTL and I'll let you speak to van if you've got some experience there. Mine's mostly the LTL space. When it comes to Hazmat, each LTL carrier has usually an access portal of charge for Hazmat and that might be I mean, I got LTL is gonna be very different, but it might be 50 bucks, it might be 25 bucks for an LTL shipment which might just be a pallet or two. But they treat Hazmat just the same way as they would treat any other accessorial charge Like requires a lift gate, requires inside delivery, requires delivery at a military installation, stuff like that. The big LTL carriers are all Hazmat certified, so it's not hard. You're not trying to go out there and search for a truck that's got Hazmat certification, but in the full truck world with vans, where do you? I mean, cause you've got to find a driver that is Hazmat certified, has placards and all that stuff. So what has your experience been with that?

Speaker 2: 10:57

Not only that, but you have a whole range of Hazmat classes that have different types of insurance requirements, so you have different prices for that insurance. You have different driver requirements to haul those Hazmats. So, like in the tanker world, this is really common because you can have some very, very nasty chemicals hauled and similar looking equipment to things that aren't that nasty and I mean like stuff that if it gets on you you can't get off and you need to go to the hospital immediately, like very, very extreme examples, like you could pay 20% more than your entire load to move that. But again, that's in the tanker world. On vans, if you're like non corrosive, like kind of, I would say, like your easier hazmat, like batteries and things like rule of thumb, like 250 to 350 above your van rate, is usually good enough to get a hazmat driver to move a similar. Because, especially if you're in a market where there's lots of them, that's where the subjectiveness comes to. Like I've done a lot of this work around Chicago. There's lots of cares that move in and around that area and it's pretty easy to find a hazmat for an easy classic a battery. Now, again, if you're moving some liquid that is in you know containers or totes. That is very, very corrosive. You could pay twice the line haul rate to find a carrier that even has the ability to haul that. And I'll give you one specific Example. Where I ran into this a lot it was with ammunition and explosives. Like I saw rates that were three to four times the line haul rate to use carriers to haul explosives and ammunition. The insurance, the protocols to move it, the driver certifications.

Speaker 1: 12:43

That's a really good point I didn't think about when I read this question. Yeah, the more like your one point whatever explosives that like you're, I think 1.5 is worth a lot of the fireworks fall. Yeah, that stuff.

Speaker 2: 12:56

And not to mention, you're also dealing with, like, if it's for the July time, you're dealing with a peak shipping time, so yeah, and again, you, if you're gonna move this and your customer does a lot of hazmat, you're gonna spend a lot of time learning about it. You need to learn about the class. You need to call carriers to see how many actually can move this, and you'll Ask lots of questions. What I advise anyone out there if you're in this situation like post the loads up there, put the hazmat class and ask the carriers that you talked to like hey, how many drivers do you have that could move this? Hey, it looks like the line haul rate for this lane is this what would you need to run this? Talk to half a dozen on a couple different lanes and you'll get an idea. Okay, this one is super hard to cover. This one seems like everyone I talked to could run, and it seems to be about this much above that's where all my numbers come from is literally doing it right calling carriers, posting them out, talking to them and seeing who had it. And then I mean for that the fireworks. Not, it wasn't even fireworks, for me, it was ammunition. It was like firearm ammunition for like competitions. Yeah, it took me like a whole week to find two or three carriers that only do this. And when I started talking to them it made all the sense in the world and it was literally like, I think at the time we were paying like two bucks a mile. They were charging like eight bucks a mile to the haul of the same loads and again for all the reasons we just got outlined.

Speaker 1: 14:16

Yep, yeah, that's good, all right, good tax question here. We're just tax seasons around the corner. It's in my first year as a 1099. I am projected to make around a hundred K Congratulations. What can I expect to pay in taxes and how can I handle write-offs and deductions? Well, me start by saying I'm not gonna answer this guys. I'm not gonna actually tell how much he's gonna pay because I don't know. I'm gonna tax pro. But I look it up there.

Speaker 2: 14:45

Here's the answer, at least according to the filing statuses if you're single, a hundred K, you fall under 24% federal, not state. If you're married, filing jointly, at a hundred K, you're yeah but it's awesome, it's tiered, so you're gonna pay your first. Whatever is gonna be no tax and between I Mean round numbers for, like general rule of thumb, I always kind of go with like 25%.

Speaker 1: 16:29

Yes it's probably where you're fall the, the like industry average accepted like amount for taxes for 1099 Is usually like a quarter of your pay. Yeah, now, keep in mind yeah, you mentioned like single versus married is gonna change it up. In your first year as a 1099 you are not required to make quarterly estimates, assuming that it's your first time, like if, like if you were a 1099 somewhere else and immediately switched over, then yes, but your first year ever as a 1099 you don't have to make poorly estimates. You can just file at the end of the in tax season the next year and Pay whatever your owed amount is, with no penalties. After that, your first full year, you are supposed to make quarterly estimates and if you don't, they can. Or if you don't, or if you underestimate, they can add a penalty on there. It's like 500 bucks or something like that. Now, expenses as far like right he said right off some deductions. So is a 1099. Here's the way I would, here's the way I would always do it, and your tax person is going to give you different advice. But if you're able I'm assuming they're an agent from the 1099, right? So assuming you're a sales agent for a brokerage, if whatever you're paying for is directly used for the business, then by all means it's a deduction. Like if you're paying for your own load boards if you are, if you had to buy a computer, if you're paying for your cell phone bill or whatever your phone system is, then you can, you can write those off. Now, if you're going to do a like, some people will try to write off the square footage of their home office and there's a formula to do it. But then again, I'm not a real estate or a financial expert, but you, whatever you've depreciated off your house and written off, would have to be recaptured when you sell your house, if I'm correct. So ask your tax person because I've asked about, I've asked about writing off my home office for certain things and my tax guy's like dude, it's not worth it, it's not Everyone I've talked to said it's not worth it either.

Speaker 2: 18:55

I've looked into it a lot.

Speaker 1: 18:56

You're gonna end up paying more in the long run when it's recaptured, if you know not if, but when you sell your house because you're not going to live there forever.

Speaker 2: 19:03

So here's the other buckets.

Speaker 1: 19:05

I think to our state tax different in every state.

Speaker 2: 19:09

Yes, the other deductions to that I run into our meals related to business. So, for instance, you're in town and you and I go somewhere to go do work, to go record, like when we went to go meet Trey at Lean right. So hey, we got to eat lunch on the way there, we're with Trey, we're going to meet them and maybe we got to dinner, like those are all writeoffs for sure. Anything I use for my business to your point, software or technology is a writeoff. I bought it for business. It is used for business. My monitors, my computer, my headset, literally everything sitting on my desk paper, all of those normal office supplies are all deductible. Here's the one. I learned this. Here's how clothes fall. You can only deduct clothes if they have your company logo or you have had them customized with your initials. And funny short little story you know, back in the day all of the bankers used to have their initials on their shirts. The reason they did that was because they became a tax writeoff once they did that. If they hadn't, they couldn't write off those. That's why that became popular, Because I was talking with our accountant actually about this, because he was telling me about like gym owners, they wanted to write off their gym clothes and he said you can't unless it has the company's logo on it, otherwise you can't write it off, like that's where they draw the line. The overall point is you should find an account that you trust, that you can work with year over year so that you can have a good tax structure, because throughout your course of earning money, the biggest thing you're going to spend money on is taxes. So learning how and where you are spending money on taxes and what is actually can be a deduction is very, very beneficial as a business owner or as a 1099, because your biggest opportunity to reduce your taxable income is as a business owner. There's huge advantages in the tax code for when you own businesses to be able to get tax benefits to incentivize businesses. So, speaking with your accountant, talking to them and really understanding not just what happened last year and what you can deduct, which is what most people do while you're there okay, we're going into next year. What did I take advantage of that? I could, and for me, one of the big things is have separate business accounts, because it makes this so much easier. Like, have a checking account for your business and have one for personal and only use that debit card when you buy things for your business, then at the end of the year everything is just in that account. You can just export it, send it to your accountant. They can see everything you bought. And, by the way, I don't think you need receipts. The IRS is okay with taking a debit card transaction, I believe, and lieu of receipt, which just makes all of this easier going forward, because I do some of this with other clients and it's a nightmare when they try to figure it out after the fact.

Speaker 1: 22:01

The last thing I'll say is you can write off anything you want, but you get on it and you're gonna have to come answering to the IRS and here's something important they don't audit you when you file it.

Speaker 2: 22:14

They have three years to audit you. So it's not like you send this in and you get your refund check and you're like, oh, got away with it. They got three years before you're gonna hear them knocking your door and come and audit you. And if they audit you, you're fairly certain you're gonna pay some penalty Is it only three.

Speaker 1: 22:30

I don't know why. I thought it was like seven.

Speaker 2: 22:32

I think it's three great. I'm not sure I could be wrong.

Speaker 1: 22:35

We're not tax pros, so I'm gonna move on to the next question. While you research that, my customer has asked me to upload PODs and invoices to their online TMS. Is this normal? It is fairly common. In a lot of companies they outsource a lot of their Administrative work and computer systems to a third party. So you might be, you might be bidding on a third-party TMS Of theirs online. You might be receiving load tenders through that TMS. You might be invoicing them and submitting paperwork on that TMS. It's pretty common. If you have one of those systems in place for a customer, make sure you're a counting person, whether that's you or somebody else understands how to use it, because if there's ever Assessorial charges that have to be entered in and requested or approved, it'll typically go through those systems. So, yes, those aren't fairly common. What'd you find out, ben?

Speaker 2: 23:25

Three years in most cases. However, if you have omitted more than 25% of your gross income, they can go back six years on what they consider a fraudulent return, and there is no time limit if you didn't file, if you've never filed or if you filed a false or fraudulent return with intent to evade taxes, which I'm guessing they could probably Justify in any scenario, you know I thought it's funny and I saw this as a meme the other day, but I've seen it before.

Speaker 1: 23:58

It's like no 20, there's a spot on your taxes to report like illegally earned money from like doing drugs, bribes, stuff like that, and it's literally on the on the tax form.

Speaker 2: 24:08

So you know, the funnier one I thought you were gonna say is there's a meme that's like hey, it's tax time, we won't tell you how to pay it, what to do, how to read through the tax code, and if you don't get it right, you go to jail. Good luck, yeah, that's basically the US tax code. You're on your wrong, it's very complex and if you get it wrong you go to jail. Good Yep.

Speaker 1: 24:30

But hey, good stuff, great questions. Keep sending them in. That's all I got. Well, you know we'll get more. Get some more questions on the next final mile here, ben thoughts.

Speaker 2: 24:42

For sure, whether you believe you can or believe you can't, you're right until next time, go bills.

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