Digging for the Tax Oyster
Over the last year I’ve written many articles about the advantages of subsistence allowance (aka per dium, aka meal allowance). Since November 2008, in association with Over the Road Magazine, I’ve even written two articles per week on the industry analyst blog “Canada Truck Operators”.
The incorporated “employee subsistence allowance” system brings tax savings to operators at a dramatic volume and, once trained, the compliance to the rules is not at all that difficult to live with. However, I’ve noticed that in order for operators to embrace the system and its savings they generally need customized individual help. Most operators are savvy to driving and navigating but vulnerable to paper cuts. Consequently they rely heavily on their accountant’s advice. Usually this reliance and trust is well earned. However, sometimes sound accounting advice is both wise and difficult to find. It appears too many accountants are too busy to train operators to comply to the rules month by month. Unfortunately, without personal assistance many operators abandon the opportunity, some even claiming “sour grapes”. However, those who have found an accountant who can apply the rules for them retain its dramatic savings.
As with most things in life, the two general rules are, if it’s too easy it’s probably not worth it and the other rule is, if it even appears difficult it’s probably worth the effort. The ease of becoming “self-employed” is staggering. One call to CRA and a GST account is opened. Then, the only thing for the operator to do is fill the shoe box full of receipts. Accountants can pop off a statement of business activity sometimes within days or even hours and the annual tax question is answered, not necessarily paid, but none-the-less answered.
Qualifying for subsistence allowance takes four steps: incorporation, a regular pay structure, source deductions and subsistence calculation/payment. The entire system separates personal and business finances completely, something that operators should be doing anyway. Even still, it takes several months before most operators feel comfortable with the different cash and paper flow. The long term annual benefit however, is remarkable.
Drivers are becoming more and more educated about the system and naturally seem to gravitate to the issue but too many accountants still remain aloof. I have talked to professionals coast to coast and too many still seem “overwhelmed” with other accounting issues rather than implementing tax savings of $6-8,000 per year per client. I do know several firms who implement the system but unfortunately they don’t market their services. So until accountants feel comfortable with their firm’s application, operators may have to dig deep until they find their personal oyster.
