The average Canadian pays a huge amount of taxes says Edmonton bookkeeping. 43% on average with the remaining amount of their income left over, 37% is spent on food clothing and shelter. The highest personal tax rate in Alberta tops out at 48%. This means almost half of the income that average Canadians earn is taken away in taxes. Learning how to minimize their personal taxes can be extremely beneficial to all Canadians.
One way that people can save in taxes, is by claiming they own a proprietorship. A proprietorship is an unincorporated business that remains tied legally to the business owner and the business owner’s tax obligation. Who can claim they own a proprietorship, is anyone who has earned income personally that was not a direct result of employment and was not previously taxed. Music instructors teaching out of their home, people who are housecleaning for friends and neighbors, people who have shoveled snow or mowed lawns for some additional cash can all count the money that they have made towards them being a business owner of a proprietorship. This can also work for instructors that were hired by dance studios or fitness facilities the end up getting a company check, the has no source deductions taken from it. Edmonton bookkeeping says there is no minimum threshold for who can be considered a proprietor, even earning twenty-five or fifty dollars in an entire year is enough for someone to be able to claim that they own a proprietorship.
One way, that this is extremely beneficial is it changes how they claim their taxes. Since proprietorships are businesses that are legally tied to the business owner and the business owners tax obligation, that means that people who own proprietorships need to file their proprietorship taxes at the same time they file their personal taxes. Most Canadians have to file their personal taxes by an April 30 deadline, but the Canada revenue agency allows an extension for proprietors because they have to complete additional information. The proprietorship filing deadline is June 15 says Edmonton bookkeeping. There is many people who claim that they own a proprietorship simply to benefit from the later filing deadline.
Another benefit to being able to file taxes as a proprietor is that not only does the person who is in the income allowed to claim that they own a proprietorship, but their spouse can also benefit from the later filing deadline. This also means that a person and their spouse can engage in income splitting to minimize taxes. By giving the ability to claim the income to the spouse who earns less money in the business, can help the couple pay less in taxes overall.
When people are able to claim that they are proprietors, they can significantly save in taxes, benefit from a later filing deadline, and engage in income splitting that can help further minimize the amount of taxes that they have to pay to the government.
Edmonton Bookkeeping | Claiming Expenses On Taxes As A Proprietor
Because the threshold for who can claim that they own a proprietorship is so low says Edmonton bookkeeping, many people can claim that they own a proprietorship in order to benefit from claiming business expenses on their personal taxes. By doing that, they can minimize the amount of taxes that they pay personally, to help them save money.
Some examples of what people who are claiming that they own a proprietorship can claim on their personal tax return are a business portion of their travel, rent of their home office, mileage as well as meals and entertainment. There are some rules that they have to follow in order to claim these expenses on their personal taxes, but when they do that, they are able to save as much as they can on these taxes.
Another benefit that people can benefit from if they own a proprietorship, is that they can claim CCA. CCA stands for capital cost allowance, and people with proprietorships can use that their vehicle to claim CCA as long as they are using it for business purposes. By calculating the percentage of the amounts they drive for business purposes, they can claim that the percentage of capital cost allowance. If a person owns any equipment that they would use for earning that proprietorship income, they would be able to claim that equipment under the capital cost allowance says Edmonton bookkeeping.
Another benefit that people can have if they claim that they own a proprietorship, is being able to claim losses on their income to minimize the taxes that they pay. People can carry noncapital loss back three years and also carry it forward however Edmonton bookkeeping recommends that business owners with proprietorships will want to carry it back and apply it to the years they know they can get taxes back from. By being strategic on how they claim their noncapital losses, can help people minimize the taxes that they pay to the government.
Some people are afraid to claim that they own a proprietorship because they have concerns such as to they need to pay GST to Canada revenue agency if they operate as a proprietor. Edmonton bookkeeping says that the only time someone has to worry about collecting GST is when they make a threshold of thirty thousand dollars or more in their proprietorship. While people can apply for a GST number before that thirty thousand dollars threshold, it is only required after that amount of money. So as long as a proprietor is not earning over thirty thousand dollars a year, they do not need to worry about GST.
When people have earned some income personally that was outside of their regular employment and was not already previously taxed, they may want to consider filing their personal taxes as a proprietor, in order to take advantage of some of the tax savings that proprietors enjoy. By learning what those tax benefits are, can help people make the decision whether they want to claim as a proprietor or not.