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Released April 2011, ProfitGauges is the simplest yet most efficient accounting program for your trucking business.

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Are factoring fee's deductable

when my factoring company takes their %, can i deduct that as loss on my taxes?

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Just to clear up the wording. Deductions aren't a loss, they are just deductions.


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Let's make this a learning experience though. Now that you have totaled up your factoring fees for the year, you see how much money you're losing by using a factoring company. Look at that figure you are going to deduct; Wouldn't you rather have that money in your bank account instead of getting a deduction? Here's a calculator you can use to see how the fees translate into APR, which is the interest rate with which most of us are familiar.

You will see that a 3% fee, (if that's all they charge you) is really 40% apr! And if your customers/brokers are closer to 21 days to pay, which has been my average, year over year, that is more than 57%! If they charge other fees, such as disbursement fees, check fees, etc., you need to adjust for that in the calculator. For instance, a friend of mine used a factoring company that charged an additional $20 in fees on every load, so that needs to be considered when calculating your total cost. Even a Credit Card at 20% would be better than factoring, and if you are paid by the time you get your CC bill, and can pay it back in full, it's FREE money, as you don't pay interest on a Credit Card as long as you pay it in full by the due date. Factors are not much different than payday loans or loan sharks, they are taking too much of your money.

Now that you've totaled up your factoring fees for the year, take action to at least cut your fees in half.

I've always believed, if one has to factor invoices, they need to be leased to a carrier until they are properly funded to run a business. I've got customers that have given me a check when loaded, when empty, and in the last 5 years, anywhere from 5 to 63 days. Those that take over 30 days, I don't work with anymore. My customers average paying closer to 20 days.

Myself and 5 others got our authority pretty close to the same time, just months apart. Four of them used factoring companies, and all four are now out of business. Myself and one other are still operating. Three of them didn't last 2 years.

Now that you know, you need to write a letter to the factoring company to release you from the contract. There may be a fee for this, you'll have to look at your contract, it should be in there, $100 is a cancellation fee I've seen in a contract. You will need to make sure to obtain a UCC-3 financing statement release. If you don't, customers may still pay the factoring company as they filed a UCC-1 on you which means they own your accounts payable. Then you will have to get the factoring company to pay you, this could delay your getting paid for the invoice.

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They are a tax deduction. If your using profit gauges I would list them as a sub category under accounting.

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for example a $1000 freight bill 10% factor fee they pay you $900 income. The $100 is already deducted from your income, so you pay tax on $900 not $1000, nothing to deduct.

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Steven will be eternally grateful.
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