December is Wrapping Up Time
Year ends are times of reflection and evaluation: how much money was made (or lost) and what happened this year that was beneficial (or not). We saw our Canadian dollar drop dramatically to 77 cents on October 28 2008 from a high of $1.09 November 7, 2007. We saw the publicity of the “credit crunch” and the pronouncement of a coming economic “downturn”. Trucking companies big and small went out of business all the while fuel prices fluctuated like no other year (2007 $40’s to $80’s and 2008 $80’s to $147.27 then plummeting to $50”s). No need to go to six flags amusement park for a ride this year!
All this fluctuation is outside operators control. There is now more and more dependency on their trucking company for personal survival and security. Operator turnover is usually a spring-fall issue. Winter is generally a loyal time of year, the “hunker down in the bunker” time. So with your feet firmly planted on winter ice our reflection can now focus on personal financial issues.
As fuel prices slaughtered some operators this summer the fuel cost reprieve is a welcomed shift, especially during the winter months. Each operator should be evaluating their personal financial performance in light of the massive instability. Some may consider dramatic changes while others only tweak their business plan. In spite of the dramatic evaluations and re-evaluations this year, operators are still buzzing and jostling about taxes, specifically the different methods available.
Since the publication of my book I’ve had the pleasure (usually) of talking with accountants coast to coast about applying subsistence allowance rather than self-employed meal receipts. There are many that have changed their firms position on truckers incorporating, yet some still respond with blank faces. In some regards changing the accounting industry is more difficult than changing the trucking industry. For those operators and accountants who want some detailed comparative research on the two methods (complete with dialogue if they want), check out my BLOG “Canada Truck Operators” or “thrconsulting.blogspot.com”
Saving $500+ per month in taxes is nothing to sneeze about. If your accountant isn’t familiar with the qualifications and rules associated with the method, then get them to contact our office. Unfortunately we still get the occasional call from operators who are not getting straight answers from their current accountant. Don’t give up until you are explained the two methods in detail. If properly done the “estimated re-imbursement” method is actually less paperwork intensive than self-employed. Lighten your load rather than carrying dead weight and needless costs.
If December is a time to wrap things up than put a close to your self employed status and learn to function efficiently as an employee of your corporation. Every day that goes by costs approximately $18 in taxes. If a business is supposed to adjust to a 40% shift in exchange rates, triple digit changes in fuel costs it is a wise operator who considers the opportunity of a 30-50% reduction in taxes. It may not be the most popular method used today, but logic would assume than within five years it will be.
Contrary to popular opinion, Canadians are not tax averse. What Canadians moan about regarding taxes is “…not paying MORE than their fair share…”. The national problem, however, is defining “fair share”. The Canadian tax system is only “fair” when everyone uses the same method. If you limit your methods you limit your fairness. It’s why good accountants are paid the good money. They choose the best method available for their clients.
The estimated re-imbursement method is NOT retroactive so the benefits won’t be felt for about a year. Give yourself a Christmas bonus next year and finally get it right.