Taxes and Legal Challenges in Freight Brokerage | Final Mile 71

Speaker 1: 0:19

Welcome back for another edition of the Final Mile where we answer your questions. We've got three good ones today. Before we get into it, make sure to subscribe, share us like the content. Check out the website Freight360.net for all of our other content, including the Freight Broker Basics course for an educational option, and please check out the sponsors in the description box to help support this channel. All right, ben, our first question. This is going to be an interesting one, but the listener asked do you have any recommendations for tax lawyers that specialize in freight brokerage? So tax. I was a little confused by it, but I wanted to break down both tax professionals.

Speaker 2: 1:02

It was a long question too, wasn't it? I saw it come through.

Speaker 1: 1:06

It was, but I want to break down the tax side and then the legal side, cause I don't know that they're the same person per se. But I will say, you know, when it comes to to having a tax person, I have not found that just a general bookkeeper or tax person. I have not seen that not work Right, like even for Freight 360, the guy that that helps us out with our, our books. He doesn't just exclusively help out companies like us, right, he's got all kinds of clients. The key here is to know what you're good at and to use other people to fill in the gap where you're not an expert. And the tax code and tax law is, I think, the last. I saw a tweet the other day that was like our tax code is like 75,000 pages long or something like that, and you've got your state taxes, you've got your federal taxes.

Speaker 1: 2:00

There's all kinds of things that go on and a good tax professional can help you manage the best way to you know not pay taxes where you're not required to. You know find the best way to write things off, the right way to do things. There's definitely some shady folks out there that will tell you you can write certain things off that you can't and you're rolling the dice, right. But the key thing here is if you're taxed, like even with my personal taxes right, I don't file them myself, I pay a firm, you know, a little bit of money each year because they're experts at it, right? If we're dealing with all kinds of different things that go into the return, especially once you're married, have kids, you have a house, like there's all kinds of deductions that you may not know about, that a tax pro will and they're going to understand the changes in the law that might happen each year or periodically, as the you know.

Speaker 1: 2:54

The DC current administration has effective changes to the tax code. So that was my advice on the tax side. Do you have anything to add there?

Speaker 2: 3:04

Yeah, and I'll just I mean, I'll use myself and personal experience as an example. Like, I went to college for accounting and finance, so it's like I literally spent four years of my life learning gap and accounting, and all this. But as soon as, like, I started operating businesses, even from my personal side, I immediately handed it over to somebody that does this all day right. And again, justin, who handles both of ours and I know him personally got recommended to me from another business owner that you know. He handled a lot of stuff with him. And the first is it's not that you don't have the ability to do it. Lots of people absolutely can still do this themselves. But the thing that is most important, at least from my point of view, is the amount of time it would have taken me to get updated in what happens every year to the tax code to make sure I'm doing this both one correctly and most advantageously. It's not worth the time. Right, like, even if you're making like I don't know, like a reasonable amount of money, I don't know, whatever it is like you are, basically, in most cases you're probably leaving a lot of money on the table by not paying somebody to do this, which sounds kind of funny, like wait, I'm paying somebody and somehow it's cheaper. Yes, because they're going to know exactly the best ways to do this what you can write off, what you can't Like.

Speaker 2: 4:26

In fact, I outsourced all of that stuff to our accountant, like all of my businesses they handle and my personal, and then I just set it up the way he said it. So it's like I use this business debit card for these things, I use personal ones for these things, and I've asked him this. In fact I asked him this, like last month I personal ones for these things. And I've asked him this month, in fact I asked him this like last month. I go hey, is this a business transaction? Can I use my business card for this?

Speaker 2: 4:51

And he went if it's in question, use your business one, because I'm also paying them to go through every line item every month of everything I spent on the business. And he's like look, if there's one that doesn't qualify, we'll move it over. You don't have to worry. Like you're already paying us to do that anyway. And for me, like one huge peace of mind that I know it's done correctly and that I'm not incurring fees or penalties. And two, I know that like I'm getting the most bang for my buck, for I mean, nobody wants to give Uncle Sam another dollar than you need to.

Speaker 1: 5:19

And I mean I'm with you. So the legal side, you want to hit on that.

Speaker 2: 5:24

No, I was just going to read the actual question, because I pulled it up for context was need your help. I'm looking for a tax lawyer that specializes with working with freight brokerages. We had a penalty proposal from the IRS for not filing 1099s electronically. Any recommendations?

Speaker 1: 5:44

Interesting. Okay, I don't know the exact answer to that. A tax person would, though, so this is definitely not a lawyer question. Although the quick lawyer answer is there's transportation attorneys and I would definitely get one that specializes in it. But back to the tax part. What do you got?

Speaker 2: 6:03

Oh, I was just going to say related again, definitely no longer an accountant and definitely not an attorney, right? But my friends and guys I still talk to often that are tax attorneys, they tend to do more planning stuff, more like estate stuff. It's not necessarily, like, I think, the way someone would traditionally think of an attorney, like, oh, something's wrong and you use them to fight something Again. I'm sure they do that as well. But most of what they do when I talk to them is doing like planning things to understand, like legal entities and structures to set them up related to the tax code, and they're very familiar with both the penalty inside.

Speaker 2: 6:42

But like I think you're right, like when I read this to me I would have like, if that happened to me, I'm going to my CPA first and then if my CPA says, oh, you can fight this or hey, I've seen people win in these cases like then maybe an attorney because I've asked him this too, I go, hey, like have you ever dealt with like audits? How does this go with the IRS? And he's like, well, if they dig in, you're always going to get a penalty, because if they're spending time with you, they find something wrong even if it's done correctly. You almost always have to pay the bill. And he said I've never seen anybody be able to go back, justify and still get out of the penalty Again. That's from one accountant's point of view and one conversation, but that's where I would start.

Speaker 1: 7:23

The 1099 thing is interesting because they're probably talking about 1099s to subcontractors but not to carriers. Because we don't have to provide a 1099 to all of our carriers. It's one of the excluded. Unless it's changed Because somebody asked this question two years ago, Do I have to send a 1099 to every carrier that I paid and the answer is no, it's one of the excluded ones.

Speaker 1: 7:51

You have to account for the expenses on your books, but you don't have to send out a 1099 to every single one. But yeah, get a good tax pro, someone who you feel comfortable around, that they can help educate you on why they're advising you certain things and not just tell you what to do. So All right. Next question how can I get a shipper list for my freight brokerage? So first of all, I would tell you that the majority of shipper lists out there are garbage and they've probably been circulating for years and like I literally did a cold calling with a guy earlier this year and he had this shipper list of like 20,000 companies and like half of the data on there was either irrelevant, like wrong numbers, person moved on, or they had been contacted by everyone else who had bought that list. Right. But let's talk about other ways to source shippers.

Speaker 1: 8:37

Um, since we just talked with ryan from gen logs on the podcast that came out recently, gen logs is great for sourcing shippers and also shipper crm. Their their newest, latest release is like really, really cool. You and I had looked at it with Paul from Freight Caviar probably a year and a half ago. I'm actually doing an updated demo on it with them next week, but it's really cool. I know they're selective about who they let into their community. They don't want to have the bad actors, obviously, in there. But, yeah, I'd recommend. Those are two good sources, and then we've got plenty of other content on where to find shippers, but I think those are two good places to start and you're using real-time data and analytics to determine who the companies are that you should be calling on, versus a list that who knows when it was created and how accurate it is. Any thoughts?

Speaker 2: 9:32

Yeah, yeah, I would go. I would go to shipper CRM and do a demo is the first place I would go. The second thing I would do is, yeah, we've talked about this a lot, but you can go to your library, get a library card and get access to a database that is called Data Axle now used to be Reference USA and you can search. They call it NAICS codes North American Industrial Code System, I think is what it is but you can find every company in North America through that database. In fact, you end up with the other problem it's not, can I find enough? It's that you will get so many. You have to sort through the tens of thousands to make it a usable list. So if you do go that route, what I would do is make sure you don't search by the whole country, like if you find, and you can just Google these things, like pick any commodity and Google NAICS code and then the commodity steel washing machine, you can literally put anything in there. It'll give you the code, put that code into Data Axle.

Speaker 2: 10:37

But the first thing to do is pick a state. Do not do it across the whole country, because you're going to get like tens of thousands and then just do one state at a time and a very small geographic region and you will get tons of companies that you can reach out to. A lot of them have the phone numbers with them. Whether they're the right phone number is another question, but it is a great way to get yourself started. You pick one commodity. You can easily get a thousand leads and then you can just work through it and honestly just use Google Maps to get another phone number, and that is a great way to just get started with this. Shipper CRM I'm pretty sure still has a free trial where you can get in there and you can just start calling and just literally find leads, companies and phone numbers to do this.

Speaker 1: 11:21

Yep and I'll reiterate what we said on the podcast episode with Genlogs is having these tools helps break down barriers, but you're still going to have to put in the work to be a very, very high quality communicator and rapport builder, because that's what's going to get you over the finish line or into the end zone to get that next customer set up and actually doing business with you. But definitely use the tools that are out there to make the lead gen part of it easier.

Speaker 2: 11:51

Yeah, and the other thing I would say to your point right, we just announced this. This would have been Friday, when everyone's listening to this. There are 190 slots. As I checked right now for free trial to GenLux, you'll have it for 30 days, this tool.

Speaker 2: 12:05

It's absolutely mind boggling how effective this is for finding shippers, being able to see some of the lanes they're moving. So when you call them, you can actually have a conversation as to whether or not you have carrier relationships where they are, and if you don't, you can use that list to search carriers that are running that lane. You can call the carriers, then call the shipper and go hey, talk to a few carriers that are already up in your neck of the woods every week. Would this be helpful for you guys? It makes that conversation so much more effective and robust as opposed to hey, can I move some of your loads? Do you got any freight for me today? Like that tool alone to be able to use that for a month for free. It's probably the best deal on the market in our industry right now. For sure, for sure.

Speaker 1: 12:49

All right. Last question I finally got a customer Congrats, that's awesome. And I need to move a load of lumber from Savannah, georgia, to Crescent, texas. I've never heard of that town before. It requires an open deck trailer. What's the best way to find a carrier for this load? All right, so how do you find it? Now that you've gotten a customer, which way to go? That's like.

Speaker 1: 13:10

Usually one of the hardest hurdles for most new brokers is getting that first load to bid on and quote. Now, how do you find a carrier? Well, there's all kinds of ways to find capacity. It's going to depend on the tools that you have. So load boards are a common way for new brokers to find capacity, because they don't know anybody yet, right? So we're assuming you have no carry relationships. You can post that load and say, hey, I'm looking for a flatbed. Well, first of all, verify that it's a flatbed it is an open deck, but I'm assuming it's a regular standard flatbed trailer and then search that lane. You can post a load on DAT or TruckStop and then you can search for trucks in that lane as well on those load boards.

Speaker 1: 13:55

Other ways that I have used would be I used to use the DAT directory. If I was just trying to find any carrier at all, I would look at origin, even destination, try to grab emails and phone numbers and call, looking for available outbound or deadhead or, I'm sorry, either outbound or return trips like backhaul capacity in those lanes for those carriers, highway makes it pretty nice now as well. They've got a capacity sourcing and searching tool where you can type in the lane, the equipment type and it'll look through inspection history and whatnot. Genlogs will hit on them again. Theirs is insanely accurate If you're fortunate enough to be a customer of theirs.

Speaker 1: 14:33

I know that it's limited, but there are so many tools out there. What I will caution you is you do not need to pay for everything. You should just have the tools that give you enough data that you can make a good decision. Then eventually your internal TMS data is going to be king because it'll be real. It'll be carriers that you've used, real rates, real times and all that stuff. But if you're brand new, I mean realistically you're going to probably start with the load boards. What else you got for that for carrier sourcing? Yeah, I mean same.

Speaker 2: 15:04

If you've got a customer and you're starting to get loads, you need a load board. Even with the other tools, I still think it's a necessity and I think you absolutely should just pick up DAT. Use one of our links for a discount. That's where I would start, because, also when you're starting, I would say truck stop can be better than DAT for open deck in some areas. But DAT is going to be your best, I think, like Swiss Army tool general tool to be able to find loads for wherever your customer might need help. At first I would have that one. I would absolutely have signed up for Genlogs if you can get in there. If you can't, then I would use Highway as probably my next best after that. The other thing too, I want to point out for somebody that's just moving their first load, you absolutely need a carrier vetting tool. You do not want to just be booking your first truck without being able to vet this carrier. Now, highway is probably best in class, but you're probably looking at about $400 or $500 a month, I think, for like their basic and if you've only got one load and you're still on a budget but you need to grow, carrier 411 is a very good option. I think that is more cost effective and highway to start.

Speaker 2: 16:14

And the thing that I would tell you to look at is first look for any freight guard reports, which are any reports that any brokers put out related to fraud with that company. The second thing I go to immediately is I scroll all the way down to FMCSA contact changes. If there's been any recent changes to their phone number, to their email address, that can be a red flag. So you want to make sure you are talking to the carrier at the correct, accurate contact information. If they just changed it two days ago to an email that looks very similar to the old one, very red flag. Probably don't want to use them.

Speaker 2: 16:50

If there's a recent change to a phone number, I always will call that carrier back at the older phone number first just to see what they answer, because a lot of times the owner will answer like oh, yeah, we just got our phone systems updated, that changed Great.

Speaker 2: 17:04

Sometimes I'll call and they're like yeah, we didn't change our phone number. And then and we're not talking to you about that load and you find out that you are actually talking to a fraudulent broker carrier or broker. And the thing I want to point out is if you are a new broker, you are a huge target for criminals. They are going to be looking at you if you're posting a load. If they see that you don't have any credit rating yet on DAT or that you're a newer broker, they're going after you first, before somebody that's been in business a few years, because the assumption is you probably aren't using a vetting tool and might overlook the things that a more experienced broker would catch. So for anybody new out there, I think it's absolutely necessary Not like a maybe like I would not move a load without one of those tools either carrier 411 or probably highway at this point.

Speaker 1: 17:54

For sure. Great recommendations, Good questions. Keep sending them our way and we'll continue to answer them. Any final thoughts, Ben?

Speaker 2: 18:03

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

Speaker 1: 18:07

And until next time go bills.