Once again, another income tax season is upon us and we are still stuck in Covid restrictions. I have been asked many times about my opinion of when it will end. My answer is the same, it entirely depends on politics and public opinion. Different regions of North America have opened completely and others closed using nearly identical statistics. I have friends in Florida for instance who have no restrictions at all, life for them is pretty much pre-pandemic while other jurisdictions are locking down and restricting as fast (or faster) than laws may even allow. Our crazy world ship has not yet left the crazy port.
The tax deadlines this year have returned to pre-pandemic standards/rules. This means getting your paperwork together is still high priority this time of the year. There will be no delays as there was last year.
When it comes to preparing your taxes two general rules should be understood by everyone: first, most tax payers have unique situations that apply to them personally (single/married/kids, home owner/renter, RRSP contributor verses not… etc) and each tax payer should understand WHAT they are, the second general rule is… those unique situations don’t change year over year without a conscious act of the will (IE. getting married, deciding to contribute to RRSP or not, purchasing a home, having another child). In other words most of your basic tax questions will not change from the year before. Only the numbers will change (higher or lower). The entire tax system is based on consistency with only minor changes. Even though life changes dramatically (and the numbers behind them) tax laws and its applications don’t.
There is the famous adage, the two certainties in life are: death and taxes. We only have to deal with death once… taxes all the time.
If your a driver you will want to prepare your taxes asap. As stated in last months article you should get a higher return than last year (if your situation is identical to last years). Independent operators however still have a dramatically different set of opportunities. Three drivers who get the identical earnings per mile and have the same miles (yet set up their business differently) can have three very different tax bills.
A self employed operator will pay the most in taxes, then the incorporated operator who uses the TL2 will save about $2500 over the self employed (less additional accounting fees) and finally the incorporated operator who uses non-taxable benefits (NOT the TL2) will save an additional $10-12,000 over the TL2 filer.
Though I have written about this now for over twelve years, I regularly talk to operators who’s accountant refuses to research the issue, saying they already use the “best” system. I am sorry, failure to research options is no defense against over paying in taxes. There are unique situations/options that you can choose (purchasing RRSP for example) that will reduce your taxes naturally, it is your choice. Once you are a business owner you also have choices: self employed, incorporated or incorporated using NTB. You must know and use the options that bring the best results. Failure to research is no defense. If your an operator and you read this article but don’t ensure your using NTB the losses through over taxation is on your own head (bank account). Know your business options, use what’s available, don’t stop looking until you know your best route.
Tax time doesn’t have to be painful, or at least as painful as most have it. As long as you know your being the most efficient with your tax planning effort you should be fine.