OBAC serves up advice on meal taxes

WELLAND, Ont. (Dec. 13, 2002) — The Owner-Operator’s Business Association of Canada yesterday issued a recommendation that owner-operators incorporate as part of a strategy to recover the expense of meals eaten while on the road.

An incorporated owner-operator can pay himself a “reasonable” daily expense allowance and not be bound to the Canada Customs and Revenue Agency’s simplified method for claiming meal expenses on their personal income tax returns. CCRA allows truck drivers to deduct half of $11 per meal without producing receipts.

OBAC, formed earlier this year to promote business and operating skills among owner-operators, said the per-diem meal allowance strategy “offers the greatest latitude in cost recovery, as well as several tax advantages for both the owner-operator and his or her corporation.”

“We’ve had difficulty justifying the cost of incorporation for owner-operators in the past, but this strategy tips the scales dramatically in favour of owner-operators becoming employees of their own corporation,” said interim executive director Leo Van Tuyl.

In a story published in the December issue of Today’s Trucking, accountant Chris Bennett said the tax savings for a typical owner-operator receiving a per diem from his corporation are from $2,500 to $3,000 a year compared with the TL2 method.

Bennett, vice-president of TFS Group in Waterloo, Ont., said his company already has pushed test cases into court to prove its assertion that CCRA can’t prohibit truckers from going this route. As for the expense of incorporating, Bennett says that in almost every case the costs are returned three-fold in the first year.

In its statement, OBAC said sole proprietor owner-operators who use the TL2 method technically are not permitted to do so by CCRA. OBAC speculated that CCRA may soon begin disallowing simplified claims by sole proprietors and instead require receipts for all business-related expenses, including meals. If the owner-operator is unable to produce these receipts, CCRA could legitimately decide to disallow the owner-operator’s meal expense claim, the association said.