There is a significant amount of personal taxes that the average Canadian pays say Edmonton bookkeeping. While the average Canadian pays 43% of their entire income on taxes including CPP, EI and income tax, all of the rest of their remaining money, they spend only 37% of it on food clothing and shelter. Making taxes one of the highest payments that someone is ever going to make in their life, even overshadowing their house and car payments. The highest tax rate in Alberta for personal taxes is 48%, which is only slightly higher than what the average Canadian pays. Therefore, many people are looking for ways that they can minimize the taxes that they pay on their personal tax returns.
One way that many people should consider says Edmonton bookkeeping, is claiming that they own a proprietorship. What a proprietorship is, is an unincorporated business. This business remains tied legally to the owner, as well as the owner’s tax obligations. That means, that the proprietorship and the entrepreneur must file their taxes at the same time. Why this is beneficial, is because when people own a proprietorship, they can start to claim business expenses on their personal tax return. They can also have a later filing deadline, and utilize income splitting in their household to minimize taxes as well.
Many people do not understand what they need to do in order to qualify as a proprietor. Luckily, the threshold for who can be considered the owner of a proprietorship is extremely low. If someone has earned any income in that year that was not to direct results of employment, and did not have source deductions taken from it can be considered income in a proprietorship. This means, that if a person earned income by doing favors for friends and family like driving them to the airport, cleaning their house, mowing their lawn or shoveling their snow, they can claim that they own a proprietorship. There is no minimum amount that someone has to make, so even if they earned twenty-five dollars one time, they can use that on their personal tax return.
How this can help someone, is first of all because they are allowed a later filing deadline. Canada revenue agency recognizes that the additional work that someone has to do in order to file their proprietorship taxes alongside their personal taxes is additional work, and so they have until June 15 to file instead of April 30. Edmonton bookkeeping says that they can also ensure that they can income splits because spouses of proprietors can also file late as well. By income splitting, they can ensure that the person paying the least amount of taxes claims the income, therefore they minimize the amount of taxes that they have to end up paying overall.
When people are able to claim proprietorship, they can get a whole bunch of benefits personally that include filing late, income splitting, and claiming business expenses personally.
In an effort to minimize the tax payments, Edmonton bookkeeping says that people may choose to claim that they are a proprietorship in order to benefits. If someone has earned any amount of income that was not a direct result of their regular employment, they can claim that they are a proprietor. This can include things like a dance studio, a fitness facility, or a music school having an instructor come in and teach, and not having them on staff. This way, they do not pay them a paycheck with the source deductions like CPP, or EI removed from the payment, they might get cash, or they might get a company check with no additional deductions. Or, this can mean someone who takes on some clients at home, like a music instructor or a massage therapist. They get paid directly from the client, therefore they do not have taxes taken off of that amount.
Edmonton bookkeeping says that one of the biggest benefits that people can get from claiming that they are a proprietor is that they can start to claim business expenses personally. For example, they can start to claim meals and entertainment amounts as long as they were for business purposes, and they have kept the receipts on their personal taxes. They can claim mileage, which does not include commuting to and from work but can include going to meetings and running errands. They can also claim rent from their home office, which is extremely beneficial if they are a massage therapist, a music instructor, in addition to the traditional offices.
In order for someone to track the mileage, it is very important they do it meticulously mostly because Canada revenue agency often asks for proof of the mileage. People should keep a mileage log including the date, where they are coming from, where they are going to, the total number of kilometers traveled and the purpose of that travel. These have to be business-related trips, and cannot include commuting to and from work. However, if the business owner went to a meeting in between home and work or an errand, they could claim the entire trip.
In order for a person to claim rent from their home office, or home workspace in their personal tax return, they need to calculate the square footage of the space they work out of from home, and they calculate what percentage of the entire house that is. That percentage there are able to claim from their utility bills including power, gas, and water, a portion of their phone bill, Internet bill, condo fees, property tax, and rent or mortgage. This can be extremely beneficial, but people need to be aware that this cannot create a loss for their proprietorship, he can only claim as much as they earned.
Edmonton bookkeeping says that this can help people minimize the taxes that they have to pay, and since the average Canadian is spending 43% of their entire income on taxes, anything that they can do to minimize how much they pay can be extremely beneficial.