Towing Companies, CPA & Tax Services

Why Towing Companies in Dallas Need a CPA Who Knows the Industry

Towing is a cash-heavy, asset-intensive business with tax rules that most general CPAs overlook. Between heavy truck depreciation schedules, mixed-source revenue from police rotations and private impounds, driver classification questions, and Texas sales tax on certain services, a single mistake can cost you thousands in overpaid taxes or trigger an IRS audit. We work with towing company owners across Dallas-Fort Worth who need a CPA that understands how their business actually operates, not one who treats them like a generic service company.

At AG Freideman, Al Freideman personally handles every towing client’s books and returns. With 30+ years of tax and accounting experience, 52 five-star Google reviews, and transparent pricing, we give towing operators the same dedicated attention whether you run two trucks or twenty. If your current accountant doesn’t know the difference between a consent tow and a non-consent tow for revenue classification purposes, it’s time to talk to a CPA who does.

How Should Towing Companies Handle Truck Depreciation in 2026?

Heavy-duty tow trucks (wreckers, rollbacks, flatbeds) are among the most valuable depreciable assets a small business can own, and the IRS offers aggressive write-off options if you know how to use them. A new medium-duty wrecker can cost $80,000 to $150,000 or more, and failing to apply the right depreciation strategy means you’re leaving real money on the table every year.

Here’s what towing company owners need to know for 2026:

• Section 179 expensing: The IRS allows businesses to deduct the full purchase price of qualifying equipment in the year it’s placed in service. For 2026, the Section 179 deduction limit is expected to exceed $1.2 million. Most tow trucks qualify because they exceed 6,000 pounds GVWR, which also exempts them from the luxury vehicle depreciation caps that apply to lighter vehicles.
• Bonus depreciation: Under the Tax Cuts and Jobs Act phase-down schedule, bonus depreciation drops to 60% for assets placed in service in 2026. That means if you bought a $120,000 rollback, you could take $72,000 in bonus depreciation in year one, with the remainder depreciated over the truck’s recovery period.
• MACRS recovery period: Tow trucks generally fall under a 5-year MACRS recovery period for tax purposes. However, certain heavier equipment (think rotators exceeding specific weight thresholds) may qualify for different classifications. Getting this wrong changes your depreciation schedule for the life of the asset.
• Used equipment qualifies: Since the 2017 tax law changes, used equipment qualifies for bonus depreciation as long as it’s new to you. Buying a used wrecker at auction still generates significant first-year deductions.

We review every truck purchase, lease, and trade-in with our towing clients to make sure the depreciation strategy matches their overall tax situation. Sometimes taking the full Section 179 deduction makes sense. Other times, spreading it out over several years produces a better result. That’s the kind of judgment call a licensed CPA with experience in this industry can make, and a generic tax preparer can’t.

Impound Lot Storage Income: What Gets Taxed and What Gets Missed?

Storage fees from your impound lot are taxable income, but the timing and classification of that income create complications that are unique to towing. Revenue recognition on impound storage depends on when you have the right to collect, not necessarily when cash hits your account, and many towing operators get this wrong.

Common issues we see with Dallas-area towing companies:

• Uncollected storage fees: When a vehicle is abandoned and the owner never pays, you may still have recognized income if you were on an accrual basis. We help towing clients determine whether cash-basis or accrual-basis accounting produces a better tax result given their lien and auction patterns.
• Lien sale proceeds: Texas Property Code Chapter 70 allows you to sell abandoned vehicles to recover towing and storage charges. The proceeds from these sales are taxable, but you can offset them with the costs of the tow, storage, lien processing, and auction expenses. Proper documentation of these costs is critical.
• Texas sales tax on storage: Texas charges sales tax at up to 8.25% (6.25% state plus up to 2% local) on motor vehicle storage, and many operators either undercollect or fail to remit properly. We handle sales tax filing and compliance so you don’t end up with a surprise bill from the Texas Comptroller.

Storage income might seem straightforward, but the interplay between recognized revenue, bad debt write-offs, lien sale offsets, and sales tax obligations makes it one of the most error-prone areas on a towing company’s return.

Police Rotation Receivables and Government Contract Revenue

If you’re on a police rotation list in Dallas, Plano, Frisco, or any North Texas municipality, you know that payment timelines from city and county agencies can stretch 30 to 90 days or more. How you account for those receivables affects both your taxable income and your cash flow planning.

Government contract tows often come with set fee schedules that differ from your private tow rates. We track this revenue separately in your books so you can see the true profitability of your rotation work versus your private dispatch and motor club calls. This matters for two reasons:

• Revenue classification: Rotation income, private impounds, motor club reimbursements, and roadside assistance fees all flow to different parts of your return depending on your entity structure. If you’re operating as an S-Corp (which many towing companies should be for self-employment tax savings), the K-1 distribution strategy depends on understanding where your revenue comes from.
• Expense allocation: Trucks dedicated to rotation work may have different operating cost profiles than your general fleet. We allocate fuel, maintenance, insurance, and depreciation accurately so you’re not overstating or understating deductions on any single revenue stream.

Our monthly bookkeeping services ($300 to $600 per month) include bank reconciliation and revenue categorization that keeps your police rotation receivables, private tow income, and storage fees properly separated all year long.

Are Your Drivers Employees or Independent Contractors?

Driver classification is the single biggest audit risk for towing companies in 2026. The IRS, the Department of Labor, and the Texas Workforce Commission all scrutinize worker classification in the towing industry because misclassification is so common. Getting it wrong exposes you to back payroll taxes, penalties, and interest that can easily reach five figures.

The general rule: if you control when, where, and how a driver works (assigning rotation shifts, requiring your branded uniform, dictating which calls to take), that driver is almost certainly an employee under IRS guidelines. Many towing operators classify drivers as 1099 contractors to avoid payroll tax obligations, but this approach fails under audit more often than not.

We help our towing clients structure their driver relationships correctly from the start. For companies where employees are the right classification, our payroll processing service handles withholding, quarterly 941 filings, Texas Workforce Commission reporting, and year-end W-2 preparation. For situations where legitimate independent contractor relationships exist, we document the arrangement properly and issue 1099s at year end.

Towing Company Tax Mistakes We Fix

After 30+ years of working with small business owners in Dallas-Fort Worth, these are the most common and costly tax mistakes we see towing company owners make:

• Taking standard mileage instead of actual expenses: For heavy tow trucks, actual expense deductions (fuel, tires, maintenance, insurance, depreciation) almost always produce a larger deduction than the IRS standard mileage rate. Yet many towing operators use the standard rate because their previous preparer didn’t bother to run the numbers.
• Ignoring the Texas Franchise Tax: Every Texas LLC and corporation must file a Franchise Tax report and Public Information Report annually with the Texas Comptroller, even if you owe zero tax. Missing this filing can result in forfeiture of your business entity. We handle this for $250 to $500 per year.
• Failing to separate personal and business expenses: Many owner-operators use one bank account for everything. This creates a recordkeeping nightmare and increases audit risk. We set up proper chart of accounts and QuickBooks configurations so your books are clean from day one.
• Not electing S-Corp status when it would save money: Towing company owners earning $80,000 or more in net profit often save $5,000 to $15,000 per year in self-employment taxes by electing S-Corp status and paying themselves a reasonable salary. If your CPA hasn’t discussed this with you, that’s a red flag.
• Underpaying estimated quarterly taxes: Towing revenue can be seasonal (more accident tows in winter, more breakdowns in summer heat). Uneven income means uneven estimated tax payments, and getting them wrong triggers underpayment penalties. We calculate your quarterly estimates based on your actual cash flow patterns.

Ready to Work with a CPA Who Understands Towing?

We offer a free consultation to every new client. Call Al Freideman directly at (972) 893-3481 or book a virtual or in-person meeting at our Preston Road office. We’ll review your current tax situation, identify where you’re overpaying or exposed to risk, and give you a transparent quote with no hidden fees.