Many people try to come up with as many ideas as possible on how to save money on taxes says Edmonton bookkeeping. The average Canadian pays 43% of their entire earned income on taxes including CPP, EI and income tax, as well as GST, fuel tax just to name a few. The highest personal tax rate in Alberta currently is at 48%. Which means there is a significant portion of Canadians and Albertans for spending almost half of their entire income on taxes. One way that they can save on taxes, is by claiming business expenses on their personal tax return. How they would manage to do that is by claiming that they are a proprietor.
Many people do not understand what a proprietorship is. Edmonton bookkeeping says that it is essentially a business that is unincorporated and remains tied to the business owner as well as the business owners’ tax obligations. This is different than a corporation, which is its own legal entity, not tied to the business owner and has its own tax schedule. In order for someone to be able to claim that they own a proprietorship, all they have to do is be able to say that they earned income that was not a direct result of their employment, which was also not taxed. This can include high-level activities such as dance or fitness instructors working out of their home, or being contracted out at the facility, but not earning a paycheck, just a company check. It also can cover many lower-level activities such as people who have run errands for friends and family such as taking them to the airport, cleaned their house, this shovel their snow or promote their lawn. Not only is that such a low qualifying factor, the threshold is also extremely low. There is no minimum amount that someone needs to earn in order to call themselves a proprietor. Once they are proprietors, they are able to claim business expenses on their personal tax returns.
Edmonton bookkeeping says the various examples of expenses that can now be claimed on a personal tax return that could not before once a person claims that they own a proprietorship include the business portions of travel, rent from the home office, mileage, as well as meals and entertainment. By claiming these various things, a person can lower the taxes that they pay personally which can have a lasting impact on their finances.
It is extremely important that business owners of proprietorships get into the habit early on of keeping meticulous track not only of their mileage but keeping all of their receipts and all of the reasons that they created those receipts so that they can end up claiming all of those expenses on their personal tax returns at a later date. When they do this, they will be able to significantly minimize the amount of taxes that they are paying, and impact their wealth.
Edmonton Bookkeeping | Saving Money On Taxes As A Proprietorship
People who own proprietorships says Edmonton bookkeeping can change the way they file their taxes, not only allowing them to save money on their taxes but impacting their personal life as well. In order to own a proprietorship, people only have to claim that they earned money that was not a direct result of employment, and was not already taxed. Almost anyone should be able to meet that threshold, and then start claiming their personal taxes as a proprietor.
Many people believe that if they operate as a proprietor, they need to start collecting GST and thereby paying GST to Canada revenue agency. However, Edmonton bookkeeping says that people do not need to start collecting GST until they reached the threshold of making thirty thousand dollars or more as a proprietor. They can apply for a GST number four that threshold, but they are not required to until they start making more than that thirty thousand dollars. If a business owner is making that amount of money, they should think about incorporating their business rather than continuing to operate as a proprietor.
One of the most impactful ways that claiming to own a proprietorship can impact a person is changing the way they file their personal taxes. Since a proprietorship is attached directly to an entrepreneur, that means that the proprietor taxes and personal taxes are due at the same time. Canada revenue agency recognizes that preparing to tax returns at the same time could be considered a little bit more onerous, therefore they give proprietors until June 15 to file their taxes instead of April 30, which is the personal tax deadline for all other Canadians.
Another benefit of being able to file taxes as a proprietor is that spouses of proprietors can also use the June 15 filing deadline. The reason why this is significant is that this allows people to utilize income splitting to help minimize tax payments. Edmonton bookkeeping says how this works, is that the spouse that earns the lowest amount of money claims the income for the tax return. This helps minimize the amount of taxes that someone has to pay to Canada revenue agency.
Another way that business owners of proprietorships can benefits, is being able to claim business expenses personally. Including the business portion of their travel, rent from their home office, mileage, meals and entertainment as well as capital cost allowance for their vehicles or any other equipment that they own.. Business owners of proprietorships can also apply noncapital losses dated retroactively back three years. This way, someone who has experienced a loss can apply it to the previous year and actually get tax money back.
There are many reasons why a person could benefit from owning a proprietorship, especially because the threshold is so low. Not only can help them save taxes, split their income with their spouse, have a leader filing deadline, can also help them learn money back.