It’s Your Money, Your Business Your Life, Treat it So!
The Driver Inc. issue is a responsibility born from individual drivers making individual decisions. Even though a significant amount of Ontario driver market has subscribed to the practice, it appears that the majority of other provinces do not see much of it. However, since the CTA continues to present it as a “national” issue many carriers and drivers believe it to be so.
Choosing the path of incorporation rather than T4 requires a very deliberate commitment. Managing a corporation rather than an after tax paycheck is a conscious choice to complicate your finances. A choice such as that assumes someone convinced them that the added costs and inconvenience is worth it. However, I fear that advice was not born with fully disclosure.
The biggest disadvantage (among many) is carrying liability. When two corporations have a disagreement it is categorized as a civil dispute and would not be under the protection of a labor board (so it would be had to be settled in court). With the driver being incorporated the employer portion becomes the liability of the driver not the carrier as well. If/when CRA audits and reverses any business “expenses” from the “business” (classifying the business as a Personal Service Business) any tax advantage disappears also.
The great thing about Canada is the individual freedoms we live with. We have opportunities to live our lives with any orientation we so desire. This freedom is not without responsibility though. Every choice we make has natural restrictive consequences. We cannot take the advantages of one orientation and neglect to acknowledge/embrace its natural disadvantage. In business terms its called opportunity costs. Choosing one opportunity means that a different opportunity with its inherent advantages was rejected, so also with our income tax systems. When we choose to be incorporated we are forced abide by the rules of the incorporated system. The difficulty with the Driver Inc. situation is that many participants who activated a corporation were not informed of all the rules associated with such a choice. The Participants were ill informed. Whatever benefits they thought they were getting, may very well be presented in error.
Being that our freedoms allow us to choose independently, we must accept that it is our personal responsibility for the outcomes. The only exception is when those who have advised have done so in error or in fraud. Would the party who convinced drivers to incorporate now bare the costs associated with that choice? My guess is probably not. My opinion about the growth of Driver Inc. is that those who advised to do so will not take responsibility for its ultimate costs.
So, if you find yourself in this situation (as a Driver Inc.) I advise you to find the proper advice from the appropriate individual. In business (even the tax business) it is often times essential to get your advice insure/ covered. In other words do not take advice from someone who has nothing to lose by being wrong. Make sure your liability is covered.
Allow me to give you my opinion on what will be happening in the future. For the short term few (if any) Driver Inc’s will be audited (the industry is still in the “notification” mode). However, some time after a short term a group of Driver Inc.’s will be audited in mass (anywhere from 25 to maybe 100 at most). Once the results of these are audits are published the door is officially open for independent CRA auditors to descend on the industry in a random wave. This same pattern occurred in March 2007 when CRA applied the IC73-21R9 rule to 25 trucks from Monkton NB. Within six months accountants from all across Canada were telling their operators to save meal receipts rather than use the TL2 simplified method (which was successfully used for well over 20 years at the time). Over the next decade the industry settled down into a new “normal” of compliance with this issue. I believe this will also be the future of Driver Inc.
What to do now. I strongly advise that if you are a Driver Inc. to dissolve your corporation immediately. Begin working for a T4 income and pray your dissolved corporation will not be audited. I can assure you that there will be some individuals who will not get audited, and who will continue “uncaught” for some time (or maybe even indefinitely) but they may well be rare, and it would be very presumptuous that you would be one of them.
In 2007 I wrote “Making Your Miles Count: taxes, taxes, taxes”, the industries only tax book that deals with all of the independent operators tax issues. I humbly advise you to take my advice. I have nothing to gain by your choice. My advice in 2007 was for operators to incorporate and use NTB and the application for Drivers to incorporate is beyond the scope of my advice.
If you have trouble converting your carrier to provide you T4 earnings I suggest finding another carrier to work for. It’s your carrier, it’s your money it’s your future. That is the beauty of our country, we can vote with our free market feet.