The average Canadian pays almost half their income on taxes says Edmonton bookkeeping, 43% on average including taxes such as CPP, EI, GST, and fuel tax to name a few. The highest personal tax rate in Alberta currently is 48%, and many people are looking for ways to save on personal taxes when they file. There is one way that people can change the way they file their personal taxes that can significantly impact the amount of taxes they can save.
If a person earns any income whatsoever that is not a direct result of employment, and that money has not been taxed already, they will be able to file their taxes as a proprietorship. A proprietorship is a business that is unincorporated and remains tied to the business owner and business owners’ tax requirements. If people qualify as a proprietor, they will be able to change the way they file their personal taxes, to take advantage of the tax savings, and the expenses that they can start claiming on their tax return.
One of the biggest ways that this impacts how a personal file their personal taxes says Edmonton bookkeeping, is that they have different deadlines. People who own proprietorships have an extended deadline until June 15 in order to claim their business and personal taxes. While other Canadians have until April 30, Canada revenue agency recognizes that there is an additional burden that people with proprietorships have to face in order to prepare their taxes.
Once a person has decided to claim as a proprietor, there able to claim a variety of expenses on their personal tax return. Expenses such as the business portion of their travel, rent from their home office and utility bills, mileage and meals and entertainment.
In order for a person to claim their mileage, Edmonton bookkeeping recommends that they follow the following protocol to ensure Canada’s revenue agency does not have a problem with their mileage. The travel absolutely must be business-related, and also cannot include commuting to and from work, can include going to meetings or running errands from home to work or from work to home. They must keep track of the date, where they are coming from, where they are going, the total number of kilometers traveled as well as the purpose of their travel. When they are able to check these, a person will be able to include that in their personal tax return when they file as a proprietor.
It is also important that people take care when they are calculating their home office expenses, in order to do it accurately. News calculates the amount of square footage that their business space takes up in their home, and calculate what percentage that is of their entire house. They’re then able to claim that percentage of their utility bills, condo fees, property taxes and even a portion of their rent or mortgage.
When people are able to consider themselves a proprietor, not only are they able to file their taxes at a later deadline, the also be able to claim a number of business expenses on their personal tax return, which can potentially save them taxes that they have to pay.
Edmonton Bookkeeping | How People Can Save Money On Their Taxes
One way that people are able to change the way they claim their personal taxes in order to save money says ten bookkeeping, is by becoming a proprietor. In order for a person to claim that they own a proprietorship, there is a very low threshold. If they ever earn income that is not a direct result of their own employment, for example, if someone does housekeeping, landscaping like snow shoveling or lawn mowing and take payment from those clients, they can consider themselves a proprietor. Since there is no minimum amounts that they have to earn in order to be considered a proprietor, this can work for a wide variety of people.
One concern that many people have is if they claim taxes as a proprietor, they will need to start collecting GST from their clients and sending it off to Canada revenue agency. Edmonton bookkeeping reassures people that the only way that businesses have to start collecting GST is when they start making a minimum of thirty thousand dollars in their business. That is when they must apply for a GST number. Before then, there is no requirement to collect or pay GST.
Another benefit of filing their taxes as a proprietor is that the business owner will be able to allow their spouse to file their taxes as a proprietor as well. One of the benefits of that is that they can utilize income splitting to help minimize the taxes that they pay. By allowing the spouse who makes the least amount of money to claim the additional income, they can avoid paying taxes or avoid the higher paid person to be lumped into a higher tax bracket.
Proprietors also can claim personal expenses as a proprietor including their home office expenses, and it also allows them to claim capital cost allowance. This is true if they’re using their vehicle for business purposes, and if they own and equipment there able to claim that as well.
Another significant benefit says Edmonton bookkeeping of using a proprietorship to claim taxes, is that people will be able to apply noncapital losses retroactively back three years in order to allow them to get taxes back on previous years. This can be a significant benefit, and while people can do this moving forward as well, they should always apply it backward, so that they can anticipate how much they will get back if they claim a loss.
When people are able to claim they are a proprietor, they will be able to change the way they file their taxes, to help them save money on taxes significantly. It can be very easy, since the threshold of proprietorship is quite low, and a wide variety of people can qualify.