When the way that people may want to consider saving taxes personally, is by claiming they own a proprietorship says Edmonton bookkeeping. A proprietorship is an unincorporated business that is legally attached to the business owner and the business ownerís personal tax obligation. But what threshold is for considering who can own a proprietorship, is any person that earns any amount of income that is not a direct result of employment. Because the threshold is so low, and there is many different reasons why a person may have earned income, there is a large number of people who could consider themselves a proprietor and earn the benefit of claiming business expenses on their personal taxes.
There is many reasons why a person may claim that they own a proprietorship. They can do house cleaning or landscaping like snow shoveling or lawn mowing on the side even if not for a side business, but to help friends and neighbors. If they accept money for those, they can be considered the owner of a proprietorship. This is also the case for people who get hired on as an instructor and then receive a check without taxes being taken off of it. Like an instructor for a dance studio or fitness facility, a music instructor like a piano teacher. All of these examples can be considered owners of their own proprietorships. This can help them claim expenses on their personal taxes that can help them save money on their tax return.
Since the average Canadian pays 43% in personal taxes and the personal tax rate in Alberta currently tops out at 48%, anything that people can do on their personal tax return to save money is a huge benefit. When people wish to file their taxes as a proprietor, there is a few things that they need to keep in mind. Canada revenue agency actually gives proprietors in additional filing time of the forty-five days. While Canadians have until April 30 to pay their personal taxes, proprietors and their spouses have until June 15. The reason is that their taxes take a significantly longer time to prepare, and therefore they may need additional time. Even if a person wanted to take an additional forty-five days to file their taxes, all they have to do is claim that they earned additional income just once outside their employment. A great benefit of this ability to file forty-five days late, as well as include spouses in this proprietorship, can help people utilize income splitting to minimize tax payments as well. This can be significant if one person earns much higher in taxes, and they want to allow their spouse to claim all of the money that was earned outside of their regular employment, to help minimize the amount of taxes that they pay that is possible with this.
When people can consider themselves the owner of a proprietorship, they can earn a lot of tax benefits that are not available to other people. This can significantly help minimize taxes in a lot of different ways. Edmonton bookkeeping says people should explore this option if they are looking at ways to minimize the taxes that they pay in their business.
Edmonton Bookkeeping | Filing Taxes As A Proprietor
People do not need to be trying to run a large successful business in order to claim themselves a proprietor says Edmonton bookkeeping. If they have earned any income in their business that was not previously tax, they can consider themselves a proprietor and receive a multitude of tax benefits in their personal taxes. This cannot only help them minimize the taxes that they pay in their business, but it can also help them have an extended filing deadline. Since the average Canadian pays an average of 43% of personal taxes, anything that they can do to minimize that is beneficial.
Once an entrepreneur has earned income that is not a direct result of employment and has not been previously taxed CPP, EI or income tax, they can claim that they are a proprietorship. But this does, says Edmonton bookkeeping is it allows them to claim a variety of is expenses on their personal tax return. Since a proprietorship is a business that is attached to the business owner and business owners tax obligation, the proprietorship and the personal taxes must be filed together, so business owners can claim a variety of expenses on their personal tax return. Things like meals and entertainment, mileage, rent from their home office and the business portion of their travel.
In order for entrepreneurs to be able to claim meals and entertainment on their personal tax return, they need to first be keeping all of the receipts that they receive from meals and entertainment that is a direct result of their business. CRA will potentially require a business owner to show those receipts if they receive an audit letter, but that does not mean entrepreneurs need to keep the physical receipts, they can keep copies of it which might be easier.
In order for then to claim mileage, entrepreneurs will need to be very careful about how they track it. They need to include the date, where they are coming from, where they are going, the number of kilometers traveled during that trip, and the purpose of the travel. Canada revenue agency regularly checks mileage logs, so business owners need to be very meticulous with this. They also should be very careful that they are not including commuting to and from work, but it can include meetings or errands from home or from work.
In order for the business owner who has a proprietorship to be able to claim rent from their home office, they need to calculate the percentage of the square foot of their office and consider what percentage of that is to the rest of their home. They can then claim that the percentage of the household utility bills, condo fees, rent, property taxes for example.
Ten bookkeeping says that business owners who own proprietorships can save on their personal taxes by knowing what they can claim so that they can minimize tax payments personally, which can save a significant amount of money over time.