Tax saving plans for commission earners

Here we describe some TSPs briefly; for more information on most of these see Articles on our Website or simply contact us.

• Paperwork – T2200 etc: Have a T2200 issued by the employer if you have to incur some personal expenses for the benefit of employer’s business. Only the Tax Saving Plans (TSPs) based on T2200 authorizations would apply to you. Your activities will have many similarities to a proprietorship. Accordingly some bookkeeping is required to support the claims, e.g.  , for vehicle expenses.
• Accounting fees: Some tax payers are not sure how much of total fees paid to an accountant is tax deductible.  Except for some 45 to 85 dollars fees for preparing the personal tax return, most other fees are tax deductible. For example, if you paid $865, of which $65 was for the tax return and the remainder for the accounting of your investments, business or rental operation, you would receive an $800 deduction.  If you are in high tax bracket, your tax refund/savings would increase by approximately $350 so that your after-tax cost of accounting fees would be only $515. Ensure you claim as much as possible.
• Audit trails – Tax Efficient: Audits can cost a fortune unless you take proper and timely actions. They should be prevented from, and thwarted after, starting. To thwart audits, you should have proper trails for all claims. Books and tax returns we prepare are highly audit preventive and audit thwarting.
• Bookkeeping – Tax Efficient: Unprofessionally prepared books cost you much tax immediately and more later when you are audited. Our bookkeeping integrates sorting, journalizing and archiving.
• Business use of residence (BUR): Commission earners can claim parts of their home expenses for having offices at home. The claim can be computed on the basis of number of residence rooms or area—in square feet—used exclusively for business.
• Clothes: Their purchase and cleaning costs are deductible only if they are crucial to generating income, e.g. clothes of stage actors.
• Compensation to family members: Pay reasonable compensation to family members in low tax bracket for helping the business in ways no matter how small.
• Computer and software purchases: These are lately fully-deductible in the year of purchase; this should help you decide when to buy.
• Depreciation: To claim 6 months depreciation on fixed assets owned for just a few days, purchase your assets just days before your fiscal year ends, e.g. in December.
• Entertainment: Fifty % of expenses paid on entertainment enjoyed in vendors’ or customers’ company are deductible.
• Fines and penalties: Most government and court fines including parking tickets are not deductible.
• Income Splitting: This can be done in many ways to save tax. For some ways, read the paragraph “Compensation to family members”.
• Meals: Fifty % of expenses on meals taken locally in the company of vendors or customers are deductible. Meals taken out of town can be fully deductible.
• Missing papers (MPs) – solutions for: MPs usually means missing deductions and hence paying more tax. If some papers are missing when we prepare your books or tax returns, we include estimates of the amounts—that were to be found on those papers. To save penalties, do not delay filing returns. If estimates turn out far off, the amounts can be fixed later by filing adjustments to returns. A category of important MPs is Notices of Assessment (also read paragraph with this title). We strive to—and help you—procure the MPs somehow. If it is hard or impossible to procure a specific paper we will tell you which alternative substitute may suffice. Do not use this technique just to be lazy.
• Missing information (MI) – solutions for: Many times you do not know you are missing papers and which ones. Missing information (MI) helps you determine which papers are missing. Unprofessional bookkeepers and tax return preparers (UTPs) care little to procure MI because it takes time and requires special skills. We strive to procure the MI somehow.
• Notices of Assessment (NOAs) – for saving taxes: After filing your personal or other tax returns, you receive from the Canada Revenue Agency (CRA) or other government offices certain documents called Notices of Assessment. They are very important for many reasons. Send us copies of your NOAs as soon as you receive. They help us confirm that all claims we used in preparing your returns have been accepted. If we find any discrepancies, we discuss these with you. We also inform you of their effect on your taxes payable or refund receivable. Unprofessional tax return preparers (UTPs) do not care to do all this because it takes much time. NOAs also contain important information to prepare your future returns properly—which includes producing more tax savings for you. NOAs are also usually required in applying for loans.
•  Personal use of business - adjustments: For using any business resource for personal purposes, e.g. automobile and cell phone, the personal portion of expenses must be separated out for the fiscal year. UTPs avoid separating these because it takes time and requires special skills.  
•  Tax returns – Tax Efficient: Unprofessionally prepared returns cost you much tax immediately and more, later when you are audited. Our tax returns are comprehensive and include efficient archiving and hence become audit thwarting. Ask us to show you an amazing sample.
•  Travel Log: Law requires it but most of you do not have it. For each automobile used for both business and personal purposes, a Travel Log is required to show a breakdown of all driving. If you have not been doing so we have easily implementable solutions that have worked in most audits we contested, over decades.
•  Vehicles - expensive: Leasing is usually better —than buying—an expensive vehicle. The price is usually not fully deductible if you buy such a vehicle.
•  Vehicles - buy versus lease: Leasing is usually better in starting days and buying, in ending days of a fiscal year.
•  Vehicles - two or more in the family: Prefer using more expensive ones for business and the other ones for personal purposes. Also read under Travel Log.