CRA Is Scrutinizing Incorporated Truck Drivers. Is Your Corporation at Risk?

Amit Ummat, Principal Counsel, Ummat Tax Law PC – October 20, 2026

You incorporated, invoiced the carrier and filed your corporate tax returns. You may have been told that this was simply how the industry operated. Now the Canada Revenue Agency is asking whether your corporation was entitled to the tax treatment it claimed. For an incorporated truck driver, that question can lead to a substantial reassessment.

The scrutiny is real. The CRA expressly states that it is reviewing personal services businesses, particularly in the trucking industry, to identify non-compliance. Drivers who receive an audit letter, questionnaire or proposal should understand the issue before answering. [1]

What is the CRA looking for?

The central question is whether your corporation carries on a personal services business, commonly called a PSB. In broad terms, the rules can apply where you provide services through a corporation, you or a related person is a specified shareholder, and you would reasonably be regarded as an employee of the customer if your corporation did not exist. The statutory definition includes exceptions where the corporation employs more than five full-time employees in the business throughout the year, or receives the service income from an associated corporation. [2]

For many drivers, the dispute turns on that hypothetical employment relationship. Calling the arrangement an independent contractor agreement does not settle the question. Equally, an incorporated driver should not accept a PSB conclusion merely because the CRA is examining the industry. The actual working arrangement must be examined.

Why the financial consequences can be severe

PSB income is ineligible for the small business deduction and the general corporate tax rate reduction, and attracts an additional 5% federal tax. Expense deductions are also restricted. Salary paid to the incorporated employee may be deductible subject to the applicable rules, but dividends are not a substitute for deductible salary. A reassessment can therefore increase both the tax rate and the income on which tax is calculated. [3]

The CRA has illustrated the Ontario exposure using a 44.5% corporate rate for PSB income, compared with 12.2% for qualifying small business income. Applying those rates to the same $100,000 of taxable income produces corporate tax of $44,500 rather than $12,200: a difference of $32,300, before interest, any applicable penalties and personal tax on distributions. This is an illustration, not a calculation of a particular driver’s liability. The relevant year, available deductions and actual taxable income must all be checked. [4]

The evidence that matters

A useful review starts with practical questions. Who owns or leases the truck? Who pays for fuel, repairs and insurance? Can the driver refuse loads, negotiate rates or hire and pay a replacement? Does the driver bear meaningful expenses and the risk of a loss? What control does the carrier actually exercise? The answers should be supported by contracts, invoices, dispatch messages, expense records and examples of how the relationship worked. [5]

One distinction deserves particular attention in trucking. Requirements imposed by transportation legislation should not automatically be treated as evidence of employment control. The CRA itself recognizes that conditions imposed by trucking industry laws can be neutral or inconclusive. A careful response distinguishes regulatory requirements from additional control exercised by the carrier. [5]

Working mainly for one carrier deserves examination, but the analysis should address the whole relationship rather than stop at the number of customers. Truck ownership can be significant, but the review should also examine the commercial rights, obligations and financial risks that accompany it. A contract clause is more useful when the records show that the parties actually followed it.

What has changed with T4A reporting?

Beginning with the 2025 tax year, the CRA lifted its moratorium on penalties for certain failures to report trucking service payments. Its current guidance requires trucking businesses to report service fees exceeding $500 in a calendar year paid to Canadian-controlled private corporations in the trucking industry in box 048 of the T4A slip. This increases the importance of accurate reporting. Receiving a T4A does not, by itself, decide whether a corporation is a PSB. [6]

An audit proposal is the time to build the response

Before responding, assemble the CRA correspondence, the relevant tax returns, the carrier agreements and the records showing how the work was performed. Review each answer against those records. A brief answer such as “the carrier controlled everything” may conceal important distinctions between dispatch coordination, legal safety requirements and a genuine right to direct the work.

The review should address both classification and the proposed dollars. Even where PSB treatment is difficult to contest, the calculations, permitted deductions, reassessment periods and any penalties require separate consideration. Changing arrangements for future work also requires a separate review; new paperwork does not establish how earlier years operated.

If a corporate reassessment has already been issued, the ordinary objection deadline is 90 days from the date of the notice. Continuing to speak with the auditor should not be treated as preserving that deadline. [7]

Get advice before your response defines the dispute

Ummat Tax Law PC assists incorporated truck drivers and their accountants with CRA audits, proposed PSB reassessments, objections and Tax Court appeals. Amit Ummat is a Certified Specialist in Taxation Law with more than 22 years of experience in tax disputes.

If the CRA has questioned your trucking corporation, contact Ummat Tax Law PC to arrange a review. Have your CRA letter, carrier agreement and relevant corporate returns available. The first task is to identify what the CRA is alleging, what the evidence establishes and which steps must be taken before the next deadline.

General information only. Advice depends on the facts and the applicable taxation years.

Sources

[1] CRA, Fact sheet – Personal Services Business

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-income-tax-return/tax-implications-personal-services-business/fact-sheet-personal-business.html

[2] Income Tax Act, subsection 125(7), definition of personal services business

https://laws-lois.justice.gc.ca/eng/acts/i-3.3/section-125.html

[3] CRA, Understand your obligations as a corporation carrying on a PSB or the payer of a PSB; see also Income Tax Act, paragraph 18(1)(p) and section 123.5

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-income-tax-return/tax-implications-personal-services-business/obligations-psb.html

[4] CRA, Standing Committee on Transport, Infrastructure and Communities, November 6, 2025, opening remarks

https://www.canada.ca/en/revenue-agency/corporate/about-canada-revenue-agency-cra/transparency-proactive-disclosure-canada-revenue-agency/disclosure-briefing-binders-parliamentary-appearances/standing-committee-transport-infrastructure-communities-november-6-2025.html

[5] CRA, Truck drivers, employment status indicators and neutral or inconclusive facts

https://www.canada.ca/en/revenue-agency/services/tax/canada-pension-plan-cpp-employment-insurance-ei-rulings/cpp-ei-explained/truck-drivers.html

[6] CRA, Compliance requirements for the trucking industry

https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/requirements-trucking-industry.html

[7] CRA, Resolving disputes, corporation income tax

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/after-you-file-your-corporation-income-tax-return/resolving-disputes.html