Driver Pay Structures Before T4 Season: What Each Model Means for Your Taxes and Payroll

Before the T4 Arrives — Know What’s Under the Hood

As T4 season approaches, many truckers discover a hard truth — how you’re paid matters just as much as how much you earn. The pay model your carrier or company uses can quietly shape your tax bill, CPP/EI deductions, and CRA compliance risk.

At Truckers Pro CPA, we specialize in helping truckers across Canada decode their income structures before tax season hits. Whether you’re a company driver, an incorporated owner-operator, or paid by the mile, understanding what your pay means on paper can prevent overpayment — and protect you from costly CRA surprises. Let’s break it down, model by model.

1. Hourly Pay: The Predictable (But Limited) Route

How it works: You’re paid for hours worked — overtime rules apply, and payroll deductions (CPP, EI, income tax) are withheld at source.

Tax impact:
✅ CRA-compliant and low-risk.
✅ T4 summarizes income, deductions, and remittances handled by your employer.
⚠️ Limited deduction flexibility — expenses are minimal unless you qualify for transportation employee deductions (form TL2).

Pro insight:
If you’re hourly, make sure your employer classifies you correctly under long-haul or short-haul exemptions — this affects allowable meal claims and travel expenses.

2. Mileage-Based Pay: Common but Often Misunderstood

How it works: You’re paid by the mile or kilometer — typically with per-mile rates and variable bonuses for fuel efficiency or on-time delivery.

Tax impact:
✅ Still treated as employment income — taxes deducted at source, reported on a T4.
⚠️ Grey area for expense claims — many truckers mistakenly assume mileage pay covers all costs, but CRA rules separate employer reimbursements from personal deductions.
⚠️ Missed credits are common when mileage statements aren’t properly reconciled with logs and receipts.

Pro insight:
Keep detailed trip logs and fuel receipts, even if you’re paid per mile — CRA expects proof if you claim TL2 meals or lodging deductions.

3. Percentage Pay: Paid by Load, Not by Clock

How it works: You earn a fixed percentage of freight revenue, often as an independent contractor or incorporated owner-operator.

Tax impact:
✅ More flexibility — you may qualify to deduct a wide range of business expenses (fuel, maintenance, insurance, etc.).
✅ Potential to split income through a corporation (if structured properly).
⚠️ Higher audit exposure — CRA scrutinizes whether the relationship is employment or contractor.



Pro insight:
If you’re paid by percentage, make sure your contracts, invoices, and business registration align. A mismatch (e.g., T4A income but no HST registration) is a red flag during review.

4. Salary + Bonus: Stability with a Tax Twist

How it works: You earn a fixed salary with performance bonuses or safety incentives.

Tax impact:
✅ Predictable tax deductions and T4 reporting.
✅ Bonus income is taxed at your marginal rate — often pushing you into a higher bracket if not planned.
⚠️ Timing matters: If a large year-end bonus is paid in December, it can inflate your income for that year instead of spreading tax liability.

Pro insight:
Talk to your CPA about deferring bonuses or RRSP contributions to balance out spikes in income — a simple move that can lower your total tax payable.

5. Incorporated Owner-Operator: High Control, High Responsibility

How it works: You operate through your own corporation — invoice carriers, manage expenses, and handle your own payroll (T4, T5, GST/HST).

Tax impact:
✅ Lower corporate tax rates compared to personal income.
✅ Ability to retain earnings, split income (where legal), and deduct more expenses.
⚠️ Complex compliance — you must manage your own remittances, source deductions, and T4/T5 filings.
⚠️ PSB (Personal Services Business) risk if you haul exclusively for one carrier under control.

Pro insight:
At Truckers Pro CPA, we review your contracts and business structure to ensure you’re not classified as a PSB, which could eliminate your deductions and trigger back taxes.

6. Lease Operator: The Hybrid Zone

How it works: You lease a truck from a carrier and operate under their authority — part employee, part business owner.

Tax impact:
✅ May receive T4A instead of T4.
✅ Eligible for some business deductions, but limited control over contracts or clients.
⚠️ CRA often reclassifies lease operators as employees if the structure isn’t clean — leading to lost deductions and backdated CPP/EI obligations.

Pro insight:
Always keep lease agreements, payment statements, and expense logs in sync. If you’re unsure where you stand, have your CPA assess your employment status before T4 season.

Real Case: One Driver, Two Pay Models, Two Tax Outcomes

A Saskatchewan-based driver split the year between mileage pay (as an employee) and percentage pay (as a contractor).

The result:

• The T4 side was clean, but the T4A side lacked HST remittance and CCA tracking.
  
• CRA reviewed the mismatch and assessed $4,500 in penalties and interest.



After working with Truckers Pro CPA, he restructured under a clean corporation, began remitting GST/HST quarterly, and now nets nearly $6,000 more per year through proper deductions and RRSP optimization.

Before You File: Run a Pay Structure Check

Each pay model carries unique tax obligations, deductions, and audit triggers. The key is knowing which one you’re in — and whether it’s still the right fit as your income grows.



At Truckers Pro CPA, we don’t just file returns — we engineer your tax position. From pay structure reviews to T4/T4A reconciliation and CRA-safe bookkeeping, we help truckers nationwide stay compliant, confident, and cash-flow positive.

Get T4-Ready the Smart Way

Don’t wait for your T4 to tell you what you owe. Let’s plan it before the numbers hit the form.

👉 Book your “Pay Structure Review” with us — see exactly how your current model affects your taxes and what to adjust before year-end.