The deadline for remitting personal income tax (money) is April 30th. The deadline for remitting the personal income tax “return” for self employed individuals is June15. I always marveled at those two deadlines. It seems like a classic example of the “cart before the horse” or in CRA’s version: the amount before the calculation. Oh well, who can understand their reasoning’s?
The simplest form of tax reporting is the self-employed system, it currently represents an estimated 80-90% of all lease/owner operators. However, the simplest system rarely produces the best value. It’s similar to “the cheapest is not always the best” and yet, as in this case, the “cheapest” is by far the easiest. One call to Canada Revenue Agency dictating your Social Insurance Number and “poof” you are self employed complete with a GST number. The only thing between you and your tax bill is a shoebox full of receipts. But since there is no more TL2 batch or simplified method available for self employed operators your shoebox will have to be filled with meal receipts.
Compare that system with using subsistence allowance. Operators must: incorporate, sell/transfer their truck/assets into the corporation, become an employee (arrange employer-employee agreement and salary), record all days in travel status (along with its calculations), pay regular salary, pay regular subsistence allowance, pay regular source deductions, complete corporate income tax return, issue T4’s and finally complete personal income tax return. This is all over and above the collection of business receipts (excluding meal receipts).
It seems like a lot of work to eliminate keeping meal receipts. If that was the only benefit it wouldn’t pay. But all that work and diligence brings a bounty of benefits… actually non-taxable benefits! The bottom line after tax difference ranges from $5,000-8,000+ each and every year. The demands or requirements are not that difficult once you’ve been in it a while. It is not at all for the “fly by night” operators. This system has both clear qualifications and benefits.
I’ve been in the trucking industry for over twenty years. My wife and I drove team for several of those twenty. We’ve met hundreds of drivers, enough in fact for me to confidently state that there are many drivers who drive to “disappear from society” and live in the trucking sub-culture. Many of those drivers have little or no desire to follow rules, especially rules that provide mostly long term gain rather than immediate gratification. Subsistence allowance is for the sober business minded operators, those who take their investment, costs and benefits seriously.
I predict within 5-8 years 40-50% of operators will be incorporated. The remainder of operators may only be temporary in nature. That may well be a bold statement but in an era where money talks its hard to ignore the shouting at tax time.