The transportation industry works on thin margins, so every little tax break that owners and operators can get will help. For owners, consider making your drivers aware of the tax deductions they can receive just by driving. Helping your team make the most of their pay will be appreciated and will help you retain the best drivers.
There are also decisions you can make as the owner of a transportation company to help your business get through tax time with strong cash flow. That is, if you are an independent business and not a PSB. Discover our tax tips for the 2021 tax year below.
Tax Deductions for Drivers
Those who are employees driving a truck for a company, or those who work in the transportation industry and do the transportation (like a crewmate on a ship or a stewardess on a plane) can deduct a large portion of their work expenses from their taxes. Those expenses may include:
- Up to 50% of meal expenses
- Up to 50% of hotel or lodging expenses
- Up to 50% of showering services (even if you're sleeping in your cab)
- Some of the tools or supplies that you purchase
- A portion of a business phone bill.
Part of your pandemic tax advice to employees could be a list of the relevant expenses they should be deducting.
Are you a PSB?
Drivers who are incorporated may not
necessarily need to file as an incorporated business. According to the Canada
Revenue Agency, those drivers who have incorporated, but who actually act as an
employee of one business, must file as a Personal Services Business (PSB).
You may be a PSB/employee and not an independent business if you:
- Work for only one "client" company
- Do not own your truck or other tools
- Do not choose your own hauls or hours.
It is very important to get tax advice
about whether you are a PSB or not as there are many tax implications to this
nuance.
Tips for Owner-Operators
For owner-operators, tax season may be very
stressful as a large bill comes due. Especially during the volatility of a pandemic
year, you may not have been able to set aside the funds you need to cover your
tax burden.
Factoring is a great solution for those who
find their business struggles to afford tax time. With invoice factoring, you
receive the money for your invoices as soon as you send them, from your
factoring company, which handles getting the payments from your clients.
Some factoring companies may even set aside
some of that money on your behalf, for taxes. J D Factors can assist you in
this regard and if you would like us to start holding funds in trust to make
sure you can a monthly tax payment, we are happy to do this in order to keep
you on track.
Invoice factoring is a huge benefit at tax
time because it allows you to have a much stronger cash flow, so you can afford
to invest where you need and put aside funds too. It can be challenging for
your cash flow to absorb quarterly estimated payments that you have to remit in
advance. You can change that with factoring for SMEs. Reach out to J D Factors
today to discuss if your transportation business is right for invoice
factoring.
