The tax rate in Canada is exceptionally high, with the average Canadian paying 43% of their entire income on taxes says Edmonton bookkeeping. However, there are ways that people can minimize the amount of taxes that they pay personally. One of those ways is if they can claim that they are a proprietor, they can start to claim business expenses on their personal tax return.
Many people do not understand what a proprietor is, and who can claim that they are one. Edmonton bookkeeping says a proprietorship is an unincorporated business. That business is not its own legal entity, but actually is legally tied to the business owner and therefore the business owners’ tax obligations. This means of business owners’ personal taxes must get done at the same time as their proprietor taxes. This can help people save taxes, because they are done at the same time, as long as people know what they are doing.
Many people may not be aware that they can claim that they are the proprietor. They think that they need to reach a certain amount of money earned before they can claim that they own a proprietorship, however, Edmonton bookkeeping says that this is not true. Any amount of money that somebody earns outside of their typical employment that is not already taxed is considered enough to claim a proprietorship whether that was twenty-five dollars earned, or hundred dollars earned, any amount can be considered.
This definition of proprietorship and the low threshold can mean that if someone has been asked by a dance studio, a yoga studio or as a music school to come in and speak to the students, or teach a class and then received cash or a company check but without source deductions taken from it can be considered a proprietor. Also, people who see clients in their own home, and they are paid directly by that client, such as massage therapists or music teachers. Those clients are not paying taxes, therefore that counts towards someone being able to claim that they own a proprietorship. Since there is no threshold, someone can have one client in the year and consider it a proprietorship.
What this means, is that these people are able to claim business expenses on their personal taxes that they never were able to before. This means rent from their home office, mileage as well as meals and entertainment to name a few says Edmonton bookkeeping. By claiming these expenses on their personal tax return, can help people demise the amount of taxes that they have to pay, which can significantly impact their personal finances.
Edmonton bookkeeping says that when people are in any amount of money outside their typical employment, they are able to claim that they own a proprietorship, and enjoyed the benefits that business owners with proprietorships get, including being able to minimize their taxes by claiming a variety of expenses personally. This can be a huge benefit, depending on how many expenses a person can claim.
Edmonton Bookkeeping | Who Can Claim Taxes As A Proprietor
There are many benefits that people can get if they own a proprietorship says Edmonton bookkeeping. The great thing about that is that they do not need to be earning a lot of money outside their typical employment in order to be considered a proprietor and earn the benefits. If a person has ever run an errand for a friend or neighbor, or driven them to the airport, cleaned their house, shoveled their walk, or mode their lawn, and accepted money for it, they can consider themselves a proprietor. There is no minimum threshold, but the benefits that can come with it can make it worthwhile.
The first thing that people who claim as proprietors will understand, is that if they own a proprietorship, they are able to file their taxes up to forty-five days later. Canada revenue agency recognizes that proprietors have a much more difficult job, in the task of preparing to year and files, the proprietorship and the personal tax. Because of that, they have until June 15 to claim their personal taxes, instead of the typical filing deadline all other Canadian citizens have as April 30. This additional time can help business owners avoid late penalties, as well as prepare their deductions that they are going to be claiming for their business on their personal taxes.
Edmonton bookkeeping says that there is many expenses that people are going to be able to claim on their personal taxes if they have a proprietorship. If they have any business portions of personal travel, mileage, meals and entertainment as well as rent from their home office. It is extremely important though that the people are always keeping their receipts, making notes, and being very meticulous in keeping track of everything from square footage, to mileage, to reasons for their meals and entertainment. When they do this, they will be able to claim those expenses on their personal tax return.
In order for someone to claim mileage, they have to ensure that they are keeping track of their specific comings and goings. Not only the date of the trip, but also they were coming from, where they are going to, the number of kilometers that they logged, and the purpose of their travel. The reason why this is so important is because the Canada revenue agency does not allow people to include their commutes to profit from work on their mileage. The reasoning behind this is because people are going to be going to their work whether they have a business, or are regular employees. This is also why they must keep track of where they are coming from and where they are going to, and people need to understand that Canada revenue agency will definitely ask proof on a regular basis. However, if business owners go to meetings or run errands on their commute, they will be able to claim that. For example, bring from home to an errand and then the errand to work they will be able to claim the errand to work portion.