Did you know some of the most successful owner-operators drive as a team? In fact, last year some ATBS team driving clients made over $100,000 in net profit. ATBS helps more than 400 team driving clients navigate the tax implications team drivers face. Here are the top 6 considerations if you are thinking about team driving with your spouse or partner:
1. Qualified Joint Venture or Partnership
If you are married, you don’t have to form a Partnership. A Qualified Joint Venture is for married couples that both participate in their business venture. Forming a Qualified Joint Venture saves the cost of having to file a Partnership tax return. There is less paperwork involved with a Qualified Joint Venture. You simply file a joint 1040 tax return with each taxpayer having their own Schedule C allowing them to both pay into Social Security.
2. Married Couple LLCs
If a married couple lives in a community property state, an LLC may be treated as a Qualified Joint Venture, however, if a married couple lives in a non-community property state, an LLC is treated as a partnership for Federal tax purposes. The partnership is then required to file Form 1065. Click here for a list of community property states.
3. Split of Schedule C Income for Qualified Joint Ventures
When filing a Schedule C, married Qualified Joint Ventures can split their income evenly so both people pay their portion of Social Security. If Form 1099 is filled out in one spouse’s driver’s Social Security number, your tax professional will “nominee” half of the income to the other spouse’s Social Security number so they also have income paid into Social Security. In some cases, one spouse may need to pay more or less into Social Security so it may be beneficial to split your income with a higher or lower percentage. ATBS tax professionals can further explain these Social Security benefits.
4. Non-Married Team Drivers
If you are a non-married team, you are automatically a Partnership, therefore no 1099 is needed. To avoid partnership treatment, one owner-operator would need to own the business and issue the other team owner-operator a W-2. In this case, we would recommend you contact the ATBS Premium Department for assistance with Payroll Services.
Aside from these legal and tax implications, it’s important to take the personal aspects into consideration as well:
5. Pros of Team Driving:
- May decrease tax liability as you can both take per diem and write-offs increase
- You and your spouse can spend more time together.
- You’ll be able to run more miles and make more money.
- You can save on utilities and other home expenses when no one is home.
- Driving with a teammate helps prevent physical and mental stress that single drivers may endure, such as depression, sleep apnea, diabetes, and obesity.
6. Cons of Team Driving:
- Time spent together may end up being one person sleeping with one person driving.
- The passenger may turn into a “backseat” driver, increasing conflict and tension in stressful situations.
- Spending too much time together may end up putting strain on the relationship.
- You will have very little alone time.
At ATBS, over 400 of their clients are married team drivers. If you’re considering this option, please give them a call at 866-920-2827 and let them help set your business up for success and ensure your taxes are filed properly.