The 1-2-3’s of Tax Savings
Several industry analysts estimated that 80-90% of all operators are self-employed. In the last 24 months that number may have only changed by 4-5% at most. There are several reasons why the change is so low.
First there has been a lot of turnover in the lease/owner operator industry. Many operators have gone bankrupt, turned back leases and/or parked trucks. I’ve been in the industry for over 20 years and have navigated two recessions. There is always a purging in every recession, it is painful and even devastating but natural.
However, another group of operators have taken over leases or bought trucks. One operator bought a solid truck for $8,000 and had it paid for in only a few months, yet too many just took over someone else’s headache.
The group who became operators is a lot smaller than those who stopped. With a shrinking industry, those who are left are forced to make the best of it.
In these lean times, too often what will determine the success or failure of an operator is taxes. If 80-90% of operators are still not using the per-diem system they will be paying premium tax amounts. All through 2009 operators who have been properly using the per-diem system will have redefined $20-22,000+ of income into “non-taxable benefits”. That’s generally $6-8,000 in taxes (not including CPP). In this economy that amount will usually determine success or failure.
The second reason usually has to do with the cost associated with incorporating. Without the explanation of annual savings of $6-8,000 the up front cost usually discourages participation.
The third and most contagious reason for a lack of change from self employed to incorporated is the un-informed advice being given. In my writing and promotions I have spoken with numerous accountants and operators coast to coast. I still find too many accountants and bookkeepers parroting the standard “there are no benefits to incorporating”. However, after speaking with many of them for less than four minutes the response is almost always the same “Oh, so that’s how it works!”
Preparation and education is critical to success in any business. If you are still under the belief that you are getting the best tax dollar bang for your accounting buck and yet you are still self-employed, I suggest you do research on your own rather than trusting your parrot.
Contact our office for a free CD seminar on the whole system. You will not be able to reduce your 2009 taxes but you can do something about surviving 2010.
