June: Road Construction and Tax Discussion
June is the month that many self employed operators find out the bottom line tax bill for 2008. However, by now, there’s not much they can do about it. After December 31st or February 28 (RRSP’s) the numbers are pretty much set in stone. It is why some self-employed business owners mentally guess their tax bill at the end of November or early December, choosing to schedule additional maintenance or take off an extra week or two at Christmas. For those still self-employed, the tax return is due June 15th, however interest is calculated back to May first.
Some operators use their GST-ITC checks to bring down their tax bill, while others may have savings. However, there are many who resort to some payment plan negotiated with Canada Revenue Agency collections.
For those who use per-deum (subsistence allowance, meal allowance etc) taxes have been sent in by their corporations months ago (latest January 15th). Then, usually, their personal income tax was fired off at lightning speed very early in the year (so they can get a personal refund, if available). If no refund is available then they file their return April 30th. Usually the amount owing is very low, since they already receive a meal allowance/re-imbursement and cannot use the nationally popular TL2.
Along this line of discussion I’d like to inform those who are still somewhat in the dark about using the incorporation and the per-deum system. When it comes to paying taxes (actually the corporation pays it on the operator’s behalf) there is no “payment plan option”. Source deductions are classified as “monies in trust” and are due immediately on the appropriate date. It is such a critical factor that if CRA so desires they can go directly into the corporate account without notice. In fact even directors of corporations can be held personally liable for “monies in trust”. As I stated in my book, it’s not something to view lightly.
The urgency and liability however is countered by the tremendous tax savings the entire system provides. Yes it’s more complex, yes it’s more urgent, yes there are compliance issues, yes your accounting fees may cost more… but for all those costs and potential problems the bottom line is still dramatic savings, six to eight thousand dollars per year (nearly double that for team couples).
Incorporation and per-deum is not for the fly by night billy big riggers who change trucks, companies and log books as fast as erasers can rub. It’s for the investors! Investors of time, energy and compliance! It’s for those who know that preventative maintenance is less costly than breakdowns or fuel conservation per mile is of higher value than hurry up and wait miles. Per-deum (meal allowance) may have been taken out of the trucking industry by trucking companies twenty five or thirty years ago but it is making a strong comeback in the serious minded lease/owner operator sector.