A proprietorship is a business that is legally tied to the business owner, as well as the business owners’ tax obligations, says Edmonton bookkeeping. The reason why this is important to know is that the threshold for what makes a proprietorship is very low. If any person earns not previously taxed income separate from their employment at any time, they can claim that they own a proprietorship. The reason why this is important is that there are a lot of benefits that people can get by claiming that they are a proprietor. A later filing., Income splitting but their spouses, and claiming business expenses personally are just some of the things that people can benefit from by claiming that they are the owner of a proprietorship.
Some of the types of things that people can do in order to claim that they are proprietor include if they are brought in by a dance studio, a fitness facility, or a music school to teach students or a course, and they did not receive a paycheck, just the company check the did not have taxes removed from it says Edmonton bookkeeping. Also, people who did massage therapy out of their home, or Reiki, can also be considered proprietors, since they would have been paid from their clients, which is not taxed income. Even people who have done casual house cleaning, snow shoveling or lawn mowing for friends or neighbors and earned a small sum of money. There is no minimum threshold on who can consider themselves a proprietor, even a small amount of money can help a person claim proprietorship.
It is very important also that people understand that as they are claiming themselves a proprietor, their spouse can also claim that they are proprietors, which can help business owners split income. The person who owes the least amount of taxes in the household can claim the income from the proprietorship, and minimize the taxes that they have to pay. This is extremely beneficial says Edmonton bookkeeping if one of the spouses earns significantly more than the other, or they are close to reaching a different tax bracket. By being strategic about who claims the money from the proprietorship, they can minimize tax payments significantly.
Another benefit that people who claim that they are the owners of proprietorship can enjoy is a later filing period. Most Canadians have to file their personal taxes by April 30, however, if people own proprietorships, they have an additional forty-five days to send in their personal tax return. There is an additional tax form they have to fill out as a proprietor, and they need to be able to send those off along with all of their supporting documents to CRA by June 15. Many people claim an extremely low amount of money in their proprietorship, just so that they can have the benefit of a later filing date.
When people consider themselves proprietors, they can save themselves taxes, as well as minimize the taxes that they pay personally by claiming business expenses on their personal taxes and income splitting with their spouse.
Edmonton Bookkeeping | Who Can Be Considered A Proprietor
Any person who earns additional income outside of their regular employment can be considered a proprietor says Edmonton bookkeeping. The reason why this is important to know is that there is lots of benefits that people can have by claiming they own a proprietorship. Even people who have earned twenty-five dollars or fifty dollars outside of their regular employment can claim that they are the owners of a proprietorship, as long as that money was not previously taxed.
One of those benefits is being able to claim business expenses on their personal taxes once they are able to say that they are the proprietor. This includes claiming a business perception of their travel, rent from their home office, mileage, and meals and entertainment. This can help a person minimize the taxes that they owe to the Canada revenue agency, and it has an extremely low threshold for them to be able to do so.
In order for a person to be able to claim a business portion of their travel on their personal tax return, is if they meet the minimum threshold for becoming a proprietor. If that person can claim that they did business on that trip, there able to claim the business portion of that trip. The proprietor can also claim meals and entertainment if they are proprietors, as long as they keep track of what business activities they were doing, and keep a copy of the receipts.
In order for someone to be able to claim rent for their home office, they need to do a few things. They need to calculate the square footage of their home office, calculate what percentage of the house that home office is, and then that is the percentage that they can claim from their utility bills, property taxes, condo fees, and rent or mortgage. The only thing to keep in mind on this one says Edmonton bookkeeping, is that this cannot create a loss for the proprietorship. They will only be able to claim as much as they earned.
Business owner to be able to claim mileage as a proprietor, they need to ensure that their tracking things very carefully says Edmonton bookkeeping. Canada revenue agency frequently asks proof of the mileage, so business owners need to be very meticulous this way. They need to have the date of the travel, where the business owners coming from, where they were going to, the total number of kilometers on that trip, and the purpose of travel. Another important thing to note is that this cannot include commuting to and from work, because that is considered a typical activity for anyone whether they were an entrepreneur or not.
By understanding what the threshold is reclaiming a proprietorship, and understanding what expenses a person can now claim on their personal tax return as a proprietor, can help minimize the amount of taxes that they have to pay to Canada revenue agency.