The main reason why people would want to claim that they are proprietors on their personal tax return says Edmonton bookkeeping, and that is to minimize the amount of taxes that they have to end up paying personally. A proprietorship is a business that is not incorporated, which is not separate from the business owner. Therefore, their personal taxes would need to be filed at the same time as their proprietorship taxes. Another reason why people would consider doing this is that the threshold for what makes a person a proprietor is extremely low, and a lot of people already qualify.
What allows a person to qualify as a proprietor, is if they have ever earned income in the past year that is not part of their regular taxed income. Many people discover that when they get there T4A form, they have not had the taxes deducted, which technically qualifies them for being a proprietorship. Other examples of people earning an income that could be considered a proprietor are unincorporated contractors, people who do a variety of services out of their homes, such as teaching music, massage therapy or haircutting. This also allows people who have ever taken money casually for favors, or one-off situations, like driving friends to the airport, shoveling snow or mowing for a neighbor, or cleaning the house for someone. There is no minimum amount of income needed for a person to earn before they can consider themselves a proprietor.
Once people have determined that they meet those requirements, and can claim their personal taxes as a proprietor, they need to understand how they can do that. Since a proprietorship is not a separate legal entity from the business owner, that means that they have to file their taxes at the same time that the business owner files their personal taxes. The proprietor needs to fill out what is called a T2125 form. Canada revenue agency has also recognized that people with proprietorships often need an additional amount of time to gather all of their documentation to file their taxes, so rather than the typical April 30 deadline which all Canadians have to adhere to for their personal taxes, proprietors get a forty-five-day extension to June 15 every year.
Edmonton bookkeeping also suggests that business owners of proprietorships take advantage of the ability to income split. Spouses of proprietorships are also eligible to file their own taxes as a proprietor. Income splitting can help people avoid paying additional taxes, by allowing them to ensure the most advantageous spouse claims the income in the business. By doing this, people can continue to avoid paying higher taxes by allowing the spouse who earns the least amount of money to claim the money on their return, to minimize taxes paid.
It can be extremely beneficial to people who are able to claim that they are proprietorship to file their taxes this way. Edmonton bookkeeping says that this can help minimize taxes, in a variety of areas.
Edmonton Bookkeeping | How Can People File Personal Taxes As A Proprietorship
Canadians are typically spending and a huge amount in taxes says Edmonton bookkeeping, the average is 43% of Canadian income being spent on a variety of taxes including CPP and EI, fuel tax and GST just to name a few. However, there are some things that people can do in order to help pay the minimum amount of taxes. If people are able to claim that they own a proprietorship, this can significantly change how they are claiming their personal taxes.
Many people wonder who can be called a proprietor, and Edmonton bookkeeping says anyone who earns an income that is not regular, taxed income. This can include a variety of people, both with intentional businesses that there earning money in, and not. Examples of people earning a variety of income can include unincorporated contractors or people who take clients in their own home and provide a service like hairdressers, or massage therapists. This can even include people who are occasionally helping out friends, family or neighbors for a little amount of money. They could house clean, mowed lawns or shovel snow several times, or even occasionally and earn additional money that could have them be considered a proprietor. Since there is no minimum amount that business owners need to be able to make in order to meet this requirement, it is literally anybody who has earned nontaxable income through any means, that could use this method.
One concern that many people have with this, is that they believe once they start reporting their income to the government, that they are going to have to start collecting GST. The good news says Edmonton bookkeeping, is that this is not true. People need to be making over thirty thousand dollars per year or more in order to be required to start collecting GST and sending it to Canada revenue agency.
Another benefit to being a proprietorship is that people can start claiming a variety of business as well as personal expenses on their personal tax returns. Examples of this include meals and entertainment, as long as a person keeps their receipts, and make notes about who was met, and what was accomplished. Mileage, as long as it is tracked properly, rent from their home office and business portions of their travel. There is also personal expenses that can be allocated to their proprietorship says Edmonton bookkeeping. Examples include portions of the utility bills, phone and Internet, property taxes, rent or mortgage, and condo fees. As long as this does not create a loss in the proprietorship. People are also able to claim capital cost allowance on their vehicles if they use their vehicle for business purposes, or for any machines or equipment they may have personally that they use that income.
People are able to claim they are proprietors on their personal taxes, there able to see many benefits, and claim many expenses that can help minimize the taxes that they end up having to pay personally.