2009 has been one of the worst years on record for the trucking industry. Many operators did not make it. Too many are hanging on by their financial fingernails. They are frantically working to build a reserve in the event of even a small downturn.
Our research showed that in 2009 operators were away from their home 6-8% more than in 2008. They didn’t necessarily earn more, they just worked more… for the same relative pay. They can’t complain about it because they may just argue themselves out of a job.
When so many operators are surviving on a paycheck to paycheck basis even the slightest of events can trigger a financial crisis. An estimated 30% of all operators will be financially decimated by income taxes this year. It’s another sobering thought. The best defense against any crisis is strategic planning. Sound advice preserves life.
The best tax system available to Canadians is the per-diem system, the non-taxable system that saves the average operator $640 per month in income taxes. If you don’t know for sure if your accountant has you on it, I can assure you…you are NOT on it.
There are three qualifications in the system: only employees can use it, only employees with a specific kind of employer-employee agreement, and then the agreement must be followed (you must have an audit trail). If this is new to you it is probably new to your accountant as well. It will require more work from them (work some may not be willing/able to do). But remember, it’s YOUR TAXES! You have the choice to use any system available to you.
There are two basic systems used by Canadian operators, they have vastly different results. The most popular one used is the simplest (Self-employed) but it concludes with the highest taxable income. The least popular one (per-diem/subsistence allowance) has the lowest taxable income.
As I documented in my book “Making Your Miles Count: taxes, taxes, taxes” the difference between the two systems is in excess of 926%. Using the per-diem system works out to annual tax savings of $7-8,000! It may be more complex. It may require more thought and monthly planning but the financial relief may keep you in the 70% non-decimated category.
If you (or your accountant) wish to know more about the proper application of the per-diem system contact our office. It’s not for everyone, it requires regular effort some are unwilling to participate in, but to those who use it properly gain the financial rewards.