Historical Opportunity from the Lock Down Chaos

The 2020 tax year (April 2021) should have significantly higher refunds than the 2019 tax year. For many it will come as a great relief or bonus; to others, it’s too little, too late. A lot depends on what your employment was during the year and what freight you were hauling. Some lanes dried up and others expanded. The vast majority of drivers/operators have survived, many even thrived, not counting those households who have gone down to one income rather than two. Personal finances and cash flows have changed dramatically as attitudes of survival and fear influenced all that we did.

During the pandemic restrictions, buying habits changed significantly enough to change entire industries… maybe forever. Personally, I found the lack of restaurant access traumatizing. I did not realize how much I had become emotionally dependent on someone taking my order… and then enjoying a meal in public. I cannot seem to accept eating food in my vehicle; that seems appropriate only when I’m seriously short of time.

I mentioned changed buying habits as people started purchasing things online rather than shopping in stores. Personally, I seem to relate to online purchasing only when I know what I want. I used to enjoy ‘shopping’ but now I’m a simple hunter-gatherer. I found that I have spent less money. However, I’m sure there are those whose spending has increased due to on-line selection and availability. The point is that people’s habits have changed. Collectively, entire markets and opportunities have appeared and disappeared. What typically took a decade or more to shift, only took a year. For some, myself included, it is too much too fast. It’s not wrong, it is just different, habitual preferences.

For some, their perception of cash and debt wildly changed their habits. When that was combined with their fear of economic collapse, they lost sight of their goals. A close friend so dramatically changed their lifestyle due to fear, they stopped making payments to everybody and frantically began stockpiling dehydrated and canned food. Before the pandemic, they had paid off over 90% of their mortgage. They then just stopped paying it last summer. They lost sight of their financial goal, which was independence. They got distracted by events and never looked back at what they were accomplishing. As of the writing of this article and after my counsel, they still haven’t made a payment. Maybe that just shows how little people listen to me.

Change is always unsettling. The important thing is to get your feet back on solid ground as soon as possible. When it comes to finances, it’s never too late to correct your course, especially during the COVID crisis. I know people high enough up in banking to state that their ‘foreclosure’ rate has virtually disappeared. However, that’s not to say that 2021 and 2022 will not be the year of bankruptcies. I sure hope not but I know one loans officer who estimates that 20-30% of his clients will be declaring bankruptcy in 2021/22. He may have a client base that is overexposed from the norm, but that is still not a good sign.

As an Operator, reducing debt personally and business-wise should be your focus for the next two years. Those Operators who applied for and received a CEBA loan should start thinking about reducing it because December 31, 2022, will be coming faster than we think.

As a company T4 driver, when considering your tax refund, remember your after-tax goal… debt-free living. Every bit counts. It may not feel this way sometimes, but it’s amazing how good, consistent, financial management contributes to your peace of mind. A T4 company driver should be focused on debt reduction while it’s still possible.

CRA moved the TL2 meal allowance from $51.00 ($13.60 after tax) to $65.00 ($17.30 after tax). That’s a 27% increase in non-refundable tax credits. With the average driver’s tax return being $3,500 a year in 2019, the new return will be about $4,500. That represents one of the biggest jumps in the TL2 allowance since it was associated with the trucking industry back in 1984 (and slightly before). For a complete chart of the TL2 allowance history in Canada, go to: www.makingyourmilescount.com/about/research. The chart compares the TL2 non-refundable tax credits (red) to the blue non-taxable benefits (as described in my book “…taxes, taxes, taxes”). The real tax savings for an operator is not in the TL2… it’s in non-taxable benefits… which increases bi-annually and independently of lock downs, political pressure or TL2 guideline changes.

Getting an extra $1000 tax refund, if invested properly, can make a phenomenal difference in the future.

Be safe, be wise.

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 robert@thrconsulting.ca.