Minimizing taxes is a huge goal for many Canadians says Edmonton bookkeeping, with the average Canadian paying 43% of their entire income on taxes. While paying almost half of their income on a variety of taxes, they spend 37% of the remaining amount on food clothing and shelter, taking personal taxes and of the highest amounts of money that a person will pay, eclipsing even that of their house and their vehicles.
One way that people can work to minimize the taxes that they are paying personally, is claiming to be a proprietor, and changing the way they file their personal taxes. Anyone can be a proprietor, as long as they have received income in the past year that is not regular, and taxed income. Since proprietorships are unincorporated businesses, any time that a person receives nontax income, they can consider themselves a proprietor.
Most people are not sure what the difference is between a proprietor and a corporation. Edmonton bookkeeping says that a corporation is its own, separate legal entity. It has its own tax requirements and is completely separate from an entrepreneur. A proprietorship on the other hand is an unincorporated business, and because it is not its own separate legal entity, not only does it remain tied to the business owner, but it also shares the business owners tax obligations. This essentially means that a business owner must claim their proprietorship and their personal taxes at the same time.
Many people wonder what type of income they need to be earning in order to consider themselves a proprietorship. There is literally no minimum amount required in order to consider themselves a proprietorship. One amount of income earned in a year matter how small it is can be and off for a person to be able to claim this. Therefore it can work on a variety of people including people who work part-time out of their house such as a massage therapist taking on clients in their home, or a fitness instructor who teaches classes individually, where both of these examples would receive money from their clients directly, and therefore it is non-taxed income. This can also apply to unincorporated contractors and even people that are occasional money through occasional activities like house cleaning, snow shoveling or lawn mowing. Even someone who drives a friend to the airport for some money, can claim that they are a proprietorship.
With the threshold being so low for people being able to claim proprietorship, this means that a wide variety of people can benefit. Edmonton bookkeeping says that people who have decided to file their taxes as a proprietorship, need to remember that they need to file their information together. They will need their personal tax return, as well as a form called a T2125. By filing these are the same time, they are meeting the requirements to file as a proprietor. While most people are required to pay their personal taxes by April 30, Canada revenue agency has given proprietors an additional forty-five days in order to help with the additional paperwork.
Edmonton Bookkeeping | Can People File Personal Taxes As A Proprietorship
Minimizing the taxes that they pay is a huge goal for many Canadians says Edmonton bookkeeping, and there is a way that people are able to claim business expenses on their personal tax return. If there able to claim their taxes as a proprietor, this can a enable people to be able to claim a variety of business expenses on their personal taxes.
Some examples of expenses that people can claim if they have a proprietorship include their business-related mileage, went from their home office, meals and entertainment as well as the business portions of their traveling. In order for people to be able to claim these types of expenses, Edmonton bookkeeping recommends they keep very good records, not just receipts, but details about who they were meeting with, and what they talked about. And especially when it comes to mileage there are a lot of requirements that Canada revenue agency will require be followed before they will allow it to be used on tax returns.
In order for a person to be able to track their business mileage, not only do they need to ensure that its business-related, but it also cannot include commuting to and from work. Edmonton bookkeeping says that the logic behind this, is when a person commits to and from work, it does not matter if they are a business owner, or an employee, that is an expense that they would incur no matter what. Therefore, commuting does not count. They need to keep track of the date, where they were coming from, where they are going to, entire amount of kilometres traveled, and the purpose of that travel. Even though it does not allow people to count commuting to and from work, if they have meetings or business-related errands in their, they will be able to claim the time spent going to those meetings or errands.
People may also be able to claim a certain amount of personal expenses allocated to their proprietorship. Examples of this are home office expenses including utility bills, condo fees, property taxes. How this works, is when they work from home, calculating the square foot space of the area that they work in, and calculating what percentage that is of the house. That is the percentage that they can claim of all of those aforementioned bills. It is important to note however those people cannot create a loss in their proprietorship, they can only claim as much as they earn.
Edmonton bookkeeping says there is lots of things that business owners can keep in mind to claim on their personal taxes once they have decided to file their personal taxes as a proprietor. In addition to requiring the specific form they need to fill out as a proprietor and keeping great records, people can save a significant amount of taxes personally, which can help minimize the amount that they are paying.