IRS Form 2290 & Heavy Highway Vehicle Use Tax Deadline Update

TRANSCRIPT

Announcer:
Welcome back to The Trucker CFO Podcast and thanks for connecting with us again on PodWheels.  In this episode of the podcast, we will be sharing a news alert with you that will focus on the upcoming deadline for submitting IRS Form 2290.  We will be talking specifically about what owner-operators and independent contractors need to know about paying the heavy highway vehicle use tax.  As always, we'll be hearing from Colton Lawrence, The Trucker CFO.  Colton is once again joined on this edition of the podcast by Greg Thompson, the Executive Producer of PodWheels.  As you'll hear, Greg asked Colton a series of questions covering all aspects of IRS Form 2290 and the heavy highway vehicle use tax.  Now as we take you to the interview, Colton connected to PodWheels through Zoom audio.

Greg Thompson:
Folks, it's great to be back with you here again on The Trucker CFO Podcast.  Greg Thompson alongside The Trucker CFO Colton Lawrence.  And Colton, as we mentioned to folks in the opening, we're going to be talking about the 2290 Form, and when you first mentioned this to me, I was like, what is this? But a lot of owner-operators and a lot of people in the industry know what this form is and a lot of them don't, so let's get people educated.

Colton Lawrence:
Let’s do it Greg, excited to talk about this topic.  It's not a really complex topic, but it's one that people seem to either know a lot about or know nothing about. So we're going to kind of fill in the gaps and bring people up to speed on what they need to know on the topic.

Greg Thompson:
Well let's dive into it and let's go back to the original question I asked, which is what exactly is the 2290 Form and why should we care about it as professional drivers, particularly as owner-operators?

Colton Lawrence:
Well Greg, the 2290 is actually what is known as the heavy vehicle use tax.  The purpose of the 2290 or this use tax is actually to bring in monies to the federal government to help maintain the bridges and roads, the highways and byways across the United States, that get additional wear and tear from the heavy vehicles that are traveling across them.  In a sense, it’s to try and kind of level the playing field between the light vehicles that don't cause as much damage and the heavy vehicles that cause more damage.

Greg Thompson:
So It's really kind of the cost of doing business, right?  We know that we're moving 80,000 lbs. of freight in a lot of cases across the nation's highways and it makes perfect sense that an 80,000 lb. vehicle is going to do more than the minivan.

Colton Lawrence:
That's right, when you get out there on some of these heavily used roads where you've got these tractor trailers coming regularly through that thoroughfare.  You'll see often times where the dualies actually making indents into the road or into the pavement.  That extra weight from those vehicles is what's causing that damage to the road.  And so there's a fund put together by the federal government and it is accomplished through this heavy vehicle use tax and they use those funds to help repair some of that damage caused by these heavy vehicles.

Greg Thompson:
Well, Colton, when you lay out that way, it begins to answer just who has to pay it.  And as I look at this, it's pretty obvious that if you're a major carrier out there, even if you're a small carrier out there, you've got company trucks, you're going to be familiar with this tax, but as you know, and as our audience knows, we're really trying to drill down to the issues that matter to owner-operators and independent contractors.  So tell us what the 2290 means to an owner-operator or an independent contractor.

Colton Lawrence:
Well, it really is going to depend on whether or not the owner-operator or independent contractor is responsible for filing and paying their own 2290.  If they are leased with a motor carrier, one of those mega fleets or even one of the smaller fleets, sometimes the motor carrier will actually take care of that filing and the owner-operator will not be responsible for it.  It is in those cases where we run into clients that really have no idea what the 2290 is, or that they even have this extra tax that they have to pay.  Oftentimes with those motor carriers, they will pass the cost back onto the owner-operator through a settlement deduction that they may or may not be aware of and other times they don't.  But for owner-operators, especially those that are driving under their own authority, they definitely are familiar with and aware of the 2290 filing and when it is due.  We'll talk more about the intricacies of the filing itself here momentarily.  But yeah, to answer your question, Greg, it just kind of depends on what their situation is as to how familiar they are going to be with the overall concept.

Greg Thompson:
So Colton, as I was listening to you describe who is responsible for the 2290 and how it's handled, a couple of questions come to mind.  I want to throw them your way.  Let's say that I am an owner-operator or independent contractor with a large or midsize carrier.  Any carrier matter of fact could do this as you were just saying.  I would think that it would be a good idea to check with that carrier to make sure that just who is covering this tax.  Is this something that the carrier is doing?  Is this something that the carrier may have done in the past and changed the policy?  It had been a year and I just joined the company and I don't know about this.  How can I make sure that if I'm with the carrier, that it's covered or if I'm with the carrier and it's not covered?

Colton Lawrence:
Well, you can always start by looking at your settlements if you are leased on with a motor carrier.  You can also contact your contractor relations group with the motor carrier and ask.  But it is definitely something you want to make sure you know the answer to because the ramifications of not filing your 2290 and not paying that tax are pretty severe.  If you get caught at one of the weigh stations and they check and ask for your Schedule 1, which is one of the forms that come as a result of filing your 2290.  If you don't have that stamped copy, they can shut you down and you'll also be hit with some pretty hefty fines.

Greg Thompson:
Well Colton when you lay it out that way and you're talking about being shut down at a weigh station, there are few worse fates in trucking.  I mean I can think of a handful but being shut down in a weigh station, not being able to move and not being able to make money and not being able to run my business.  That's a pretty bad thing.  We definitely need to dive into this and make sure that we've got it covered.  First of all, we talked a little bit about who has to pay it.  We know that owner-operators have to pay it, and independent contractors have to pay if you're not having it covered by your carrier.  If I have to do it independently, what is involved with filing a 2290? What kind of preparations do I have to make?  Can I do it under my social security number?  What all is involved with getting this thing covered?

Colton Lawrence:
Greg. The first thing you have to look at is what is the taxable gross weight of your vehicle.  If you're driving a truck that has a gross weight of greater than 55,000 lbs. then you are more than likely going to be subject and required to file this 2290.  If you are driving a vehicle of greater than 55,000 lbs. and are required to file the 2290, the next thing you need to make sure is that you have a federal employment identification number or in other words an EIN. You have to have that EIN to file the 2290 with the IRS.  This is a little bit different because many independent contractors will lease on with a motor carrier using their Social Security Number, and in order to file the 2290, it doesn't work that way.  They have to have an EIN.

Greg Thompson:
Well let's stop you right there.  I want to talk a little bit about how do you get an EIN?  Because I've got an EIN, I've got an LLC.  But in talking to you earlier, I know that you don't have to have an LLC or business entity to have an EIN.  So how do you go about getting an EIN and not even have to go into a business entity if you're not ready to do that? 

Colton Lawrence:
Well Greg for owner-operators and independent contractors that already have a business entity in place such as an LLC or a Partnership or even if they're running as an S-Corporation, they will already have an EIN.  But for those independent contractors who are running as Sole Proprietors, they may not have an EIN.  And the best thing for them to do is to work with a professional such as those individuals at Trucker CFO that do these things on a daily basis to get that EIN established for themselves and have a discussion about whether or not they want to take the additional step of setting up a business entity and all of the other tax and legal protections that come with that.  I would recommend they also listen to our podcast series and we have a couple different episodes that touch on this subject specifically.

Greg Thompson:
So Colton, if I'm an independent contractor and I'm listening to the two of us talk about this and I heard the different parts of it as you said earlier, there's not a lot to the 2290.  But there are a few things that can trip you up and this EIN is definitely one of them and to have your team at Trucker CFO be ready and able to easily handle the need to walk somebody through the process of getting an EIN, that is definitely comforting and you guys can also help to facilitate to handle the filing of the EIN is that correct?

Colton Lawrence:
That's correct. We can take them through the process of filing for an EIN.  And most of the time it's something we can have done in just a matter of minutes.

Greg Thompson:
Wow in just a matter of minutes. I'm out there in my first year as an independent contractor and this is something that I looked at it, and I thought I had all my bases covered.  Now you're telling me I've got to file this form and cover this tax payment which is a lot for a new business owner.  This is something that you guys can handle easily.  It's really no sweat.  Right?

Colton Lawrence:
That's right.  No sweat at all.  Give us a call.  We're happy to help out.

Greg Thompson:
So let's talk a little bit about, when is this due?  What is the deadline?

Colton Lawrence:
So this is actually one of the most confusing parts about the 2290 is the deadline.  The tax year for the 2290 filing period runs from July 1st to June 30th in any given year.  So in fact it actually straddles two different years and you are required to pay the 2290 tax for any portion of any month that falls within that filing period.

Greg Thompson:
Colton, we've been doing these podcasts for about two years.  I just heard what you said, I thought I followed it, but that's one of those ones that I went 

uh say what?  Can you dive into that a little bit more because it confused me a little bit.  I know I get confused a lot, but typically when you and I talk, I understand completely what we're talking about and this is one that when you talk about straddling two years and all of that, walk me through it if you can.

Colton Lawrence:
Absolutely, let's talk about the details of this.  Let's start with the example of an owner-operator or independent contractor who has had his or her truck for multiple years and are already in the process of needing to file their 2290.  In that case, they will file for the upcoming 2290 period which will open July 1st of a given year and run until June 30th of the prior year.  For that 12 month period of July 1st to June 30th, they will be required to pay a $550 heavy highway use tax.  The due date for that heavy highway use tax is August 31st. So the period opens July 1st. The tax is due no later than August 31st and it covers them through the upcoming 12 month period, which ends June 30th. You follow me now?

Greg Thompson:
Colton. I think I've got it now. But just for my own sanity and to walk through the process one last time, I want to summarize this and then bounce it off of you and make sure that I've got it correct for our listeners out there.  Where we are right now we're recording this. It's August 10th-11th timeframe.  And so we're in what we'll call a new fiscal period and that period is going to run from July 1st through June 30th of the following year.  Where we are right now is a countdown to a deadline.  As we said, we're mid August, we got a deadline of August 31st, we gotta pay this tax.  We understand from talking to you that if I've never done this before, particularly if I'm a contractor, I’m in a lease, I'm new to this, that the best thing to do is to call the pros at Trucker CFO, make sure that I've got an EIN.  If I don't have a EIN, you guys can do this.  You guys can file this tax and then it gets paid and I don't have to worry about it until this time next year.  Did I miss anything?

Colton Lawrence:
Greg I think you've got it, but let's throw a little bit of complexity into the mix.

Greg Thompson:
So let's do that.  Yeah.

Colton Lawrence:
So the example we gave is for somebody who's been running their truck for the entire period of July 1st to June 30th of the next year, but that's not always the case.  Oftentimes individuals have bought a new truck or are just getting into this and they have their first truck and not everybody buys a truck on July 1st.  So we've got to look at the situation where somebody buys a truck in the middle of the tax filing period.  And what are the implications of buying that truck at that time?  So for somebody who buys a truck, let's take the example of somebody who buys a truck on June 15th and there are 15 days left in that tax period to June 30th.  In that case, they will be responsible for the 2290 heavy highway use tax for the entire month of June which is the 12th month in that current 2290 filing period.  So what we do is we take the $550 for the entire year and we prorate it.  In their case, they will be subject to one month, which is $45.83.  And that same thing happens regardless of what month they buy a truck in.  So if it happens that they bought their truck in January, they will have six months.  So a pro rated tax of six months, $45.83 times six would be the amount of their tax and so on and so forth for any number of months that they have that truck in a particular tax period.

Greg Thompson:
So I want to throw another curve ball at you.  It has to do with being an owner-operator and being an owner-operator in their first year of business.  And let's say it's a really good freight year. Like 2021 is a good freight year and I'm seeing it project out and thinking, you know what, I got an opportunity to add not just one truck but two trucks, three trucks throughout the next year.  So how does 2290 play into that?  What do I need to do as I add trucks through this next year?

Colton Lawrence:
So Greg, every time you add a truck before that truck goes on the road, you have 30 days to get a 2290 filed for every new vin number that you add to your fleet.

Greg Thompson:
And again, if I don't have the right paperwork when I go to the weigh station, I get shut down. Is that the penalty that we're looking at here?

Colton Lawrence:
That's correct.  You can get shut down and they will shut you down quickly.

Greg Thompson:
So if I missed the deadline and that was one of the questions I had here, what's going to happen is they're going to shut me down.

Colton Lawrence:
They are going to shut you down.  But if that's the case, you can call Trucker CFO. We can get that 2290 filed for you quickly.  They're usually able to get back an acceptance from the IRS on the filing of your 2290 and receive a copy of your stamp schedule one which is what you have to provide to the authorities at these weigh stations.  We can usually have that back within a few hours.

Greg Thompson:
So Colton, what we're talking about here and I don't want to be flip about it, and I know that we don't want people to be in this situation.  That's why we're recording this.  That's why we're sharing it. We don't want people to miss the deadline.  But if you do and if you find yourself in that weigh station, you find yourself shut down.  Trucker CFO can be your get out of jail card.

Colton Lawrence:
We can definitely act as your get out of jail card.  But as I tell everybody when it comes to taxes, to finances, accounting, you want to stay out of jail.  So the best thing to do is get with us before that deadline happens.  We'll get that thing filed for you well in advance of you ever being shut down.

Greg Thompson:
And Colton, with this and with everything we talked about it throughout the podcast series.  It comes down to planning.  You got a plan for this.  That's why we're talking about it now, have a plan, make sure you have your EIN.  If you don't have an EIN, make sure that you check with your carrier that if you've not covered this in the past as an owner-operator, independent contractor, make sure that your carrier is covering that or if they've changed then you know about it and you're able to contact Trucker CFO and again the key is to make that call to your team at Trucker CFO to have your professionals work through this.  This is one of those things that doesn't take a lot of time, correct?

Colton Lawrence:
That's correct.  It does not take a lot of time.  You just need to provide us with some of the basic information such as your EIN, the date the truck went on the road, how you want to pay your tax, some address information.  It's really pretty simple.  Does not take a lot of time at all.

Greg Thompson:
Well as I'm sitting here thinking about this and I've got a smile on my face, it's probably going to take you less time to work with your team at Trucker CFO and file that 2290 than it does to listen to this episode of the Trucker CFO Podcast.

Colton Lawrence:
Absolutely.  We can probably have it done quicker than listening to this podcast.

Greg Thompson:
Well, I'm not sure what that says about us other than we've given you a lot of good information, some things to think about.  But definitely this is one of those things that it can really trip you up and you don't want to be sitting in a weigh station and be shut down.

Colton Lawrence:
Greg, it's really unfortunate when we see drivers that have been shut down. They're missing the opportunity to get out there and make money.  It makes life difficult for them and it just takes a little bit of planning and that is something that we talk about a lot on our podcast series is planning.  So give us a call and we're happy to help them out.

Greg Thompson:
Absolutely.  And Colton, we've covered a lot of ground here and before we go, I wanted to check with you and see is there anything that we've missed on the 2290?

Colton Lawrence:
Greg, there is something we have missed that we need to spend just a little bit of time on.  As I mentioned, the heavy vehicle use tax is $550 and you pay it for the upcoming 12-month period.  So in essence you are pre paying a tax liability.  It's one of the only taxes that work that way.  That leads to the question though, what about when I have a vehicle that I sell or perhaps it's wrecked or destroyed in some other way that I've paid the full $550 for, but I have not gotten the full benefit of that $550 because the vehicle is no longer in use.  

Greg Thompson:
So what happens in that case?

Colton Lawrence:
Well Greg, we can file credits for any stolen, destroyed, sold, or overpayment situations for vehicles that have had the 2290 heavy vehicle use tax paid for but not used.  And in that case it's a pretty simple process as well.  We just fill out a few forms, submit it to the IRS, and we can have a refund for them in a pretty short amount of time.

Greg Thompson:
Colton, you're talking about getting a refund from the government.  So I think we saved the best part for last. right?

Colton Lawrence:
That's right.  And you definitely don't want to leave any money out there for the government to use.  That's not theirs.

Greg Thompson:
Absolutely, never leave any money on the table.  That's always good business advice.  Colton, is there anything else you'd like to share with us as we close out this edition of The Trucker CFO Podcast?

Colton Lawrence:
A penny saved is a penny earned.

Announcer:
Thanks again for listening to The Trucker CFO Podcast.  As always, please keep in mind that every tax situation is unique and the prospectives shared on this podcast should not be considered as tax advice.  If you have questions regarding your specific tax situation, you should consult a qualified tax professional.

Before we close out the podcast, we would like to talk to you about Trucker CFO.  Do you have a team of tax, accounting, and business advisory professionals who understand the complexities of the trucking industry?  There are a number of ways you can contact the team at Trucker CFO.  Visit the company's website at TruckerCFO.com.  From the homepage you can fill out the contact us form which will send an email to a Trucker CFO representative.  Also through the Trucker CFO website, you can connect to the company through the find a time to talk button and set up an appointment or you can use the chat feature.  If you would rather email Trucker CFO directly, you can reach out to the company through the following address info@truckercfo.com.  That's info@truckercfo.com.  You can also call Trucker CFO toll free at 1-800-533-4230 and hit option two for sales.  That toll free number once again is 1-800-533-4230 and choose option two. 

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Be on the lookout for the next edition of The Trucker CFO Podcast right here on PodWheels.  As always, Trucker CFO and PodWheels send our best for your safe travels out on our nation's highways.  And finally we would also like to remind you that in addition to staying safe, you take the necessary steps to also stay healthy as you do the critical work of keeping the American supply chain moving.