Even if there are still a few months left for the next year, you can start looking for strategies to manage your tax burden. Whether you are a business owner or a working employee, you need to pay off your taxes when the time comes. In other words, you have to keep paying your taxes irrespective of your situation and the country’s economic condition.
Even though businesses were much affected due to COVID-19 this year just like last year, people need to pay their taxes. However, there are some reliefs offered in the tax world, like the extension of some tax-filing deadlines. The reliefs are not offered for every case, while there is no relaxation in some cases. Even in the last year, when the situation across the world was no good, the Canada Revenue Agency didn’t stop collecting taxes. Thus, no matter how bad the situation gets, you can’t escape from them. In other words, you are bound to pay taxes and there is no way you can avoid them.
However, there are ways in which you can manage your tax burden and lower your tax bill. So, if you are a business owner or an employee in an organization in Canada, this article is for you. In this article, we have listed some tips for business owners and employees to handle their taxes or manage their tax burden. If you want to find out more about these amazing tax planning tips, continue reading the following part of the article.
Tips for Business Owners
- Income Splitting
In Canada, the taxable amount is calculated based on the system of income tax brackets. Different incomes fall under different tax rates and the taxpayers have to pay the amount. More specifically speaking, people who have a high income are subjected to higher tax rates. This makes it difficult for business owners. If you are a business owner, looking for ways to minimize your tax bills, you can think of splitting your income. To split your income, you can just employ your family members like your spouse or children. If you do that, you can utilize any lower tax bracket option that might be available through other family members. This will help in reducing the overall personal tax bill for the year.
This is another great opportunity for business owners to reduce their tax burden. You can get tax exemption on certain things, like office supplies, auto and other repairs, etc. So, you should try to purchase equipment, capital, and other expenditures before year-end. This will help you get the deduction in your tax bills this year. However, if you need more advice from experts, you can reach out to an accounting firm that offers tax planning for companies in Canada. Professional tax accountants will guide you better on what to do and how to do them.
Tips for Employees
- Reducing your source deductions
People usually get tax refunds because of deductions like support payments, carrying charges on investments, and many more. If you do that, you have to call the payroll division of your local tax office in Canada. They will provide a form that you have to fill up and provide some info to back up your application. Once you do that, they will cut your withholding so you can pocket the money and lower your tax burden.
- Claim depreciation
Employees in Canada can claim tax depreciation on automobiles, aircraft, and musical instruments, depending on the situation. This is known as Capital Cost Allowance or CCA. If you want to claim this appreciation under CCA while purchasing a new asset, you should do it before this year ends. This will help to accelerate capital cost allowance claims by one year. However, you have to make sure that the asset is actually available to you to qualify for a CCA claim.
The Final Thoughts
Hopefully, now, you have a much clearer idea of how you can manage your taxes. So, whether you are a business owner or an employee at a private firm, you can think of using the above tips to lower your taxable amounts. However, if you still feel you can’t manage your business taxes, you can hire an accounting firm that offers tax planning for companies in Canada. Similarly, if you are an employee and need help with your taxes, you can consult a professional accountant. Whatever you do, make sure it is the best decision for you.