When people earn money outside of their business, and that money is not already taxed, Edmonton bookkeeping says that they can be considered a proprietor. A proprietor is essentially an unincorporated business where the business remains legally tied to the business owner and the business owner’s tax obligations. The threshold for who can be considered a proprietor is extremely low, even if they have only earned fifty dollars in an entire year doing things like shoveling snow or mowing a lawn, people can consider themselves proprietors. The reason why this is significant says is because people who can claim that they are proprietors can start claiming a variety of expenses on their personal taxes in order to minimize the taxes that they pay.
Many people do not realize that they can be considered a proprietor themselves, for example, if they are hired on to do contract work, and they do not get a regular paycheck, and the money that they earn is not taxed, they can be considered a proprietor. A dance studio or fitness facility that hires an instructor and paste them a regular check can be considered a proprietor. Housecleaning, snow shoveling, mowing lawns are all other examples of things that people can do to earn income that is not a direct result of employment. The reason why people should be aware of this is that they can claim various expenses on their personal taxes if they are the proprietor. Since there is no minimum income required to claim proprietorship, any person who has earned any amount of money in their business outside of their typical employment can consider themselves the owner of a proprietorship.
The first thing that entrepreneurs need to know, is if they own a proprietorship, they have an extended tax deadline. Edmonton bookkeeping says that business owners proprietorships have until June 15 to file their taxes instead of the typical personal tax deadline of April 30. But since the proprietorship is a business that is legally tied to the business owners’ personal tax obligations, they need to file their proprietorship taxes as well as their personal taxes at the same time, which is the reason CRA grants extensions for proprietors.
Business owners can claim a variety of expenses on their personal taxes when they are proprietor, that can help minimize the taxes that they pay personally. They can claim the business portion of their travel, mileage, rent from their home office as well as meals and entertainment. It is very important that entrepreneurs keep track of all of their mileage as well as all of their receipts so that they can claim a proprietorship at the end of the year.
By understanding what a proprietorship is, Edmonton bookkeeping says that entrepreneurs can claim a variety of expenses on their personal tax return, they can help minimize the taxes that they pay not only in their business but personally as well. This can help them significantly, save money personally.
Edmonton Bookkeeping | Tax Returns As A Proprietor
When people are earning income outside their typical employment, Edmonton bookkeeping says that they should consider themselves an entrepreneur so they can minimize the taxes that they pay. There is no minimum threshold for the amount of money that a business has to earn to consider themselves a proprietor, so that means many people can consider themselves a proprietor. There are several things that they should keep in mind if they would like to benefit from this designation.
There are many things that a person can claim on their personal tax return if they are considered a proprietor. The business portion of their travel, as well as rent from their home office, mileage as well as meals and entertainment. Business owners need to be quite meticulous when they are tracking the money that they spend, and how they track their mileage as well. In order for a business owner to claim rent says Edmonton bookkeeping, they need to be working out of their home, and have a specific home office. By calculating the square footage of that home office, they can claim whatever percentage that home-office takes up in their home, the same percentage in their utility bills including water, power, and gas. They can also claim that percentage of property tax, that percentage of their rent or mortgage, that percentage of their condo fees. They need to keep in mind however that they cannot create a loss in their business but this, they can only claim a percentage of what they earn.
In order to be able to claim mileage, Edmonton bookkeeping says that business owners have to be very meticulous on tracking all of their movements if they are going to claim mileage. They need to have the date, where the business owner is coming from, where they are traveling to, the number of kilometers they traveled, and the purpose of their travel. They have to be very aware that they cannot claim commuting time to and from work, because whether they had a proprietorship or regular job, they would still have to travel to and from work. However, business owners can claim mileage if they go to meetings or run errands. For example, an entrepreneur can count the mileage from their home to a meeting, and then their meeting to work. Canada revenue agency regularly checks mileage logs and asks proof of this, so entrepreneurs need to ensure that they are tracking this very stringently.
Another thing for entrepreneurs to remember is that if they are going to be claiming expenses in their business, they need to keep receipts. They should be making notes about what business activities they were engaging in on that receipt, and while they do not need to keep the physical receipt, they need to keep a copy of it even electronically, for up to seven years in case CRA requests to see it.
By considering themselves proprietors, and understanding what they can claim on their personal taxes can help people minimize the taxes that they pay personally. This is extremely beneficial, and just takes some forethought.