You know how hard you work for your money. Would you not work just as hard to keep more of it out of the tax collector's hands? There are differences in the way truckers complete their tax returns, but we're not that different from the average Canadian full-time employee working a 9-to-5 job (assuming there is still such a thing). While tax planning and tax preparation isn't rocket science, a little help from a specialized professional could be beneficial.
Owner-operators are not in an entirely different category from other self-employed workers. "Businesses are businesses, they claim the expenses and record the revenues," explained Robert Douglas of Capital Accounting Services. "There's not that much that makes it different.
While owner-ops can benefit from documenting expenses and revenues from a few different operation areas, the main tax preparation focus for company drivers is meal claim deductions." It's [different] from other industries, while everything else falls in line with general expense and revenue," said Douglas.
There are two different methods for calculating meal claims for company drivers: the simplified method and the detailed method. The detailed method requires the driver to keep a record book of purchases as well as submitting receipts, while the simplified method only requires a logbook to calculate the number of eligible days.
Douglas, an Edmonton-based accountant, has been specializing in the trucking industry for nearly a decade. He suggests employee drivers stick to the simplified method for calculating meal claims.
Regardless of the method chosen, it's important to make the calculations. "The meal claims have to be reduced by a percentage. If they want to make a claim by not reducing the amount, they run the risk of getting looked at by the government," added Douglas. "Once you open the door for the government they have full right to look everywhere else - and they usually do."
Tale of the Tape
Throughout the year, that shoebox full of receipts can quickly become three or four shoeboxes. For expedited service at tax time, the first step is to get rid of those shoeboxes altogether. An accountant's time is money and they're happy to charge you for it.
To reduce the amount of time spent sorting through receipts, figuring out what's relevant and what some odd pieces of paper were actually for, keep your filing current throughout the year.
"We prefer monthly sorting. They don't really need to do much else as we have our own sorting method," Douglas told highwaySTAR. "Separating between Canadian and U.S. receipts also helps a lot. We have to convert American receipts to Canadian dollars."
Actual receipts are also important when submitting paperwork. Owner-ops making a GST/HST claim will need the GST/HST number on the receipt, which will not appear on credit card or debit slips.
"The only one we don't need receipts for are meals - if using the simplified method," explained Douglas. "[CRA] is a stickler for seeing actual receipts and the details are very important."
Some receipts issued do not have an establishment's name or description of the item purchased. In those cases, it's important to write down on the receipt what was purchased and where, so the receipt can be properly classified.
While cheque and bank account information is important, whether deposit slips or a deposit book, as well as customer invoices and revenue statements, not every single receipt needs to pass over the accountant's desk.
If the item used was not for business purposes, there's a good chance it could have been recycled months earlier. An accountant does not need to see grocery bills, clothing receipts (except for work boots, work gloves and uniform costs), movie rental receipts, cigarette receipts, pet bills, personal hygiene receipts, and other personal costs.
Savings Inc.
Who gets paid and how much they earn can make a big difference when calculating taxes. An incorporated owner-operator can pay himself or herself a wage and remain in a low tax bracket. While additional taxes will be paid on the company side, the two taxes combined will most likely be lower than what a sole-proprietor owner-operator in a higher tax bracket will pay in taxes.
"I'd recommend a proprietorship that exceeds $37,000 profit in a year to look at the option of incorporating," said Douglas. "It's not a complicated process, unless maybe you try and do it yourself. To become incorporated by a professional (accountant or lawyer) is less complicated, but it costs a bit more."
Another way to defer revenues brought in by an owner-op is to pay family members to do small jobs.
"Take advantage of other family members in allocating income," noted Douglas. "It reduces the amount the company owner takes in, which reduces taxes."
Unless your second cousin's husband is an accountant, it's best to pay him for other work and stick to a professional when it comes to tax advice.
"Accountants are helpful for GST filing, in-term financial statement preparation, and just general questions," said Douglas. "There's lots of tax planning that goes along with any business, but you need to find someone who can do good tax planning." - Steve Macleod
What's Cooking?
While trucking managed to convince the Canada Revenue Agency (CRA) that trucker's meals shouldn't be subject to a 50 percent clawback last year, confusion remains about who is eligible to use the simplified method in making their meal claims. Some owner-ops around the country have reported their TL2 claims for 2006 were being disallowed by CRA, while others seemed to be getting away with it. The distinction remains - as it has always been, technically - that the TL2 simplified method is available only to employees, not self-employed individuals.
The simplified method is available for company drivers and incorporated owner-ops (themselves employees of their own corporation). The logbook is used to verify the number of days a meal deduction can be claimed, with a total cost of $51 per day ($17 per meal).
Sole proprietor owner-ops are expected to calculate meal deductions using the detailed method - keeping receipts. When using the detailed method the driver is required to keep a record book noting: the date of the expense, the time the trip started and ended, the location (name of city or town), the name of the restaurant or hotel, the type of expense (lunch, dinner, lodging…), and the amount paid. Receipts to back up the record book claims are also required.
For years sole proprietor owner-ops were filing meal claim deductions using the simplified method, but recently CRA has begun auditing those claims.
The simplified method was introduced with the intention of providing company drivers with a less taxing alternative for calculating deductions. The rationale behind the move was that regular employees are not used to doing the additional paperwork and keeping all their receipts, while self-employed people are already in the practice of keeping receipts for all their purchases. Incorporated owner-ops can use the simplified method because by being incorporated they become company drivers again.
