When the way that a person may be able to save money on their personal tax return says Edmonton bookkeeping, is if they claim to be the owner of a proprietorship. A proprietorship is a business that is legally tied to the business owner as well as the business owner’s tax obligations. The threshold for who can claim that they own a proprietorship is anyone who has earned any amount of income separate from the typical employment that they have not earned taxes on. Because this is such a low threshold, many Canadians are able to claim that they own a proprietorship, which can offer them a lot of benefits tax-wise.
One of the benefits of having a proprietorship is that business owners are able to claim business expenses on their personal taxes says Edmonton bookkeeping. They can claim meals and entertainment, as long as they are keeping their receipts, and the reason they incurred those expenses. They also can claim the business portion of any travel they have done, rent from their home-office, and mileage. In order for business owners to benefit from this, they need to ensure that they are being meticulous with tracking their information whether it is meals and entertainment, rent from their home office, or mileage as soon as they realize they are going to claim their taxes as a proprietor. This will allow them to maximize the number of claims that they have on their personal tax return, and have the right documentation required.
Edmonton bookkeeping says that in order for business owners to be able to track their mileage properly, they need to have the date that they drove, where they were coming from, where they were driving to, the amount of kilometers that they drove, and the purpose of that travel. By keeping track of this meticulously, can ensure that people will be able to claim their business travel even if CRA asks to see their driver’s logs, which they frequently do.
People who are claiming that they own a proprietorship can also claim capital cost allowance on their vehicle, as long as they are using it for business purposes, and claim the percentage of the amount they drive for business. If they own any other kind of equipment, that can be claimed under the capital cost allowance as well.
People can also claim losses on their personal tax return, as long as their noncapital losses. They can even be carried back three years, so that someone will be able to look back at a year that they know that they will get taxes back on if they claim a loss. This is extremely beneficial and can help people get money back in taxes.
When people are able to understand what a proprietorship is, and how that can change the way they claim their personal taxes, they can see the benefits of being a proprietor, and benefit from minimized tax payments and saving money personally.
Edmonton Bookkeeping | Should People Claim As A Proprietor To Save Taxes
The average Canadian spends 43% on their personal taxes says Edmonton bookkeeping, and the personal tax rate in Alberta tops out at 48%. That is a lot of money being paid personally in taxes, but there is a way for people to minimize the amount of taxes that they pay personally. By claiming that they own a proprietorship, can help people be able to claim business expenses personally and save the taxes that they have to pay to Canada revenue agency and benefit in a variety of other ways.
In order for someone to claim that they own a proprietorship, threshold is extremely low. All they have to do, is have earned income personally that was not a result of their employment, and did not have taxes like income tax, CPP or EI, off of that payment already. Examples of how a person could earn tax-free money in order to claim that they own a proprietorship is if someone ever cleaned a house, shoveled snow, mowed the lawn for anyone and earned a few extra dollars. Other examples of people who could claim that they own a proprietorship, is if a dance studio, Jim, or yoga facility brings in an instructor to teach a class or two, and then ends up paying them either cash or a business check however but the business check did not have source deductions taken from it. These could be considered proprietors. The threshold is very low says Edmonton bookkeeping, people only have to earn a very low amount of money. Even 25 to 50 dollars can help someone claim that they own a proprietorship.
When a person claims that they own a proprietorship, they have a later tax filing deadline. As a proprietor, they have to file their proprietor taxes alongside their personal taxes, but instead of the April 30 deadline, Edmonton bookkeeping says they have a June 15 deadline. Canada revenue agency understands that preparing to different taxes for April 30 might be difficult, and anyone who has claimed proprietorships can have a leader filing deadline.
Another benefit to claiming proprietorship is that the spouses of the people who earned that nontax income can also claim on this later deadline, which can help people utilize income splitting to minimize taxes that they pay. For example, if the person who earned the money made more money personally, they could income split with their spouse have their spouse claim all of the money they earned, in order to minimize the taxes that the higher-earning person would have to pay. By giving the spouse who makes the lower amount of money the income to claim, they can minimize the amount of taxes that is paid on that income.
When people understand what makes a proprietorship, and how low that threshold is, they can use that information to help save the amount of taxes that they have to pay in their personal tax returns. This can help people avoid paying that extremely high 43% in taxes.