Once again, another income tax season is upon us and we are still stuck in COVID-19 restrictions. Many times, I have been asked for my opinion about when it will end? My answer is the same. It entirely depends on politics and public opinion. Some regions of North America have completely opened, and others are 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 at this time of the year. There will be no delays as there were last year.
When it comes to preparing your taxes, two general rules should be understood by everyone: first, most taxpayers have unique situations that apply to them personally (single/married/kids, homeowner/renter, RRSP contributor verses not… etc.) and each taxpayer should understand WHAT their situation is. The second general rule is… those unique situations do not change year over year without a conscious act of will (i.e., getting married, deciding to contribute to an 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 do not.
There is a famous adage saying that the two certainties in life are: death and taxes. We only must deal with death once… taxes all the time.
If you are a driver you will want to prepare your taxes asap. As stated in last month’s article, you should get a higher return than last year (if your situation is identical to last year). Independent operators however still have a dramatically different set of opportunities. Three drivers who get 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, followed by the incorporated operator who uses the TL2 and 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), who will save an additional $10-12,000 over the TL2 filer.
Though I have written about this for over twelve years, I regularly talk to operators whose accountant refuses to research the issue, saying they already use the “best” system. Failure to research options is no defense against overpaying in taxes. There are unique situations/options that you can choose (purchasing RRSP for example) that will reduce your taxes. Naturally, that 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 you are an operator and you read this article but do not ensure you are using NTB, the losses you will experience through over-taxation is on your own head (bank account). Know your business options, use what is available and do not stop looking until you know your best route.
Tax time does not have to be painful, or at least as painful as most have it. If you know you are being the most efficient with your tax planning effort you should be fine.
About the Author:
Robert D. Scheper is a leading Accountant and Consultant to the Lease/Owner operator industry in Canada. His first book in the Making Your Miles Count series “taxes, taxes, taxes” was released in 2007. His firm exclusively serves Lease/Owner Operators across Canada. His second book “Choosing a Trucking company” is the most in-depth analysis of the operator industry available today. He has a Master degree (MBA) in financial management and has been serving the industry since he and his wife came off the road in 1993. His dedication, commitment and strong opinions can be read and heard in many articles and seminars.
You can find him and his books at www.makingyourmilescount.com or 1-877-987-9787. You can also e-mail him at email@example.com.
Robert D Scheper operates an accounting and consulting firm in Steinbach, Manitoba. He has a Masters Degree in Business Administration and is the author of the Book “Making Your Miles Count: taxes, taxes, taxes” (now available on CD). You can find him at www.thrconsulting.ca and thrconsulting.blogspot.com or at 1-877-987-9787. You can e-mail him at: firstname.lastname@example.org.