Tax Planning Tips for Self Employed Individuals
Self employment is a very interesting field as you are the boss of your own empire. Self employed persons indeed have a more advantage on Tax Savings as they have much more tax efficient income as that of the persons on the salary income basis. So it is very important for them to manage the tax efficiently to avail the full benefit of it. If you are a self employed person and falls in any category fall under head of income.
Here are some of the Tax Planning Tips that will enhance your tax efficiently:
Taking Advantage of all business expenses:
All the expenses related with the business or works are called as business expenses. There are varieties of expenses in the businesses even for the self employed individuals such as house rent, electricity bills, travel costs, internet and telephone costs, and other utilities consuming during the self employed business can be even treated as business expenses. Vouchers and bills can be even considered as the business expenses. To manage all these business expenses in a proper and regulated manner bookkeeper is very much essential. With the aid of proper Tax Planning one can claim the deprecation of all the business or work related expenses and can avail the full income from the Government.
Distribution of Income:
This task is possible in case if you involve your family member in the business. By involving them part of your income is shifted through that side too and will help you to achieve your goal as it helps to reduce taxable business income prevailing in the business.
Normal deductions are allowed for the self employed persons such as PPF (public provident fund), insurance, pension planning, fixed deposits as well as other money saving schemes. Tuition fees of your child can also be claimed from the Government through an effective tax panning scheme from the self employed individuals. One can even avail the claim deduction in regard with medical premium of the parents as well as his/ her family as a whole. If the person is living in the rented home then one can claim the rent of the house even as deduction. These also deductions depends upon the different situations and will be provided by the Government at different interest rates.
Hedge your Risk and Save Taxes:
It is important to have a life insurance scheme for every person in the family in order to have full and proper protection in case of any mishappening and incident. Avail the policies which will help you to protect your family from accident or incidents and even from the medical emergency as well as these liabilities help you to repay the loans in a lowest turnaround time possible very efficiently.
These are therefore some of the most important tips for the tax planning for the self employed individuals running their own business organizations.
People living in Canada have new options which enable them to get more tax refund and prevent few dollars from going into tax man’s pocket. Tax-free savings account is one of the key strategies which enable Canadians to invest five thousand dollars and earn tax free interest on these deposits. The main purpose is to save money and you can open this account from any financial institution. It is used in combination with RRSP – Registered Retirement Savings Plan.
According to a report released by statistics Canada nearly one-third of people living in Canada contribute towards Registered Retirement Savings Plan (RRSP). There is special software which has the embedded features of RRSP. Canadian tax filers will be able to calculate the amount of contribution or check out some other options. It enables them to invest in a scenario that gives them the best return. Your data from the last session will be carried forward by this software.
In reality, very few tax returns among the millions are actually reviewed by the IRS. It is just two percent of the total tax returns that are reviewed annually. Audit Defense Canada does not audit tax return on a routine basis unless there is something which is highly noticeable such as a deduction which required certain documents, the deduction is of high level as compared to earned income, or a certain item that is been listed as “red flag”.
If you receive a letter from Audit Defense Canada that your account will be audited than you should alert your accountant or tax attorney immediately so they can prepare a response appropriately.
Reasons for Audit from Audit Defense Canada
There is a standard list of reasons for an audit. In case you fall in one these categories, it is not necessary that you will have an audit but there are increased chances of getting one. If you fall in one of the following category, you may be audited, but this list in not all inclusive.
- If you use your vehicle for business purpose
- You are self employed
- Your salary is inordinately high
- There is an attempt from your side to deduct expenses of home office
- A long list of itemized deductions is submitted by you
If you do not include all the information related to your income or business, then there is absolutely no way you can prepare tax return in an honest manner. You may be audited at some point in your life, if you include any of the point mentioned in the above list.
Process of Audit Defense Canada
You need not be scared of Audit Defense Canada. Audit personnel will not show up at your office all of a sudden and order you to show your financial accounts and related documents. In the majority of the cases audit is done through mail and only a portion of your entire financial statement. For instance, if business meals are regularly deducted by you the audit personnel may ask for receipts.
Accounting is a key and most important factor for small business to achieve optimum and desired results. It should be managed in a regulated and sequential manner. The H&T Accountants at Oakville Mississauga have diversified and vast experience in managing the financial records and balance sheets thereby helping in achieving success.
The accountants plays a major role in the growth of the industry, as it is their responsibility to keep an eye on preparation of monthly financial reposts which depicts the growth of the industry in a particular month such as income tax, balance sheets, gross profit, budgets, and cash flow statements. These are indeed the very important aspects which depicts the financial aspect and growth of the business as a whole. Depicting these things in a proper and regulated manner can be done only by Professional Accountant.
All the above mentioned things will help you manage the company’s resources quite efficiently in an appropriate manner. On can effectively manage the things for other months if one is aware about the current status of the company since budgets and cash flow helps to provide a clear picture of the business as a whole. The main role of the accountant is make use of his adequate and sound knowledge and implements his approach in a regulated manner in preparing all these documents thereby achieving the desired growth and success expected from the business by the small business owner.
If such things are depicted in a proper and appropriate manner by your accountant, then on can easily consult and seek the advice from the accountant having vast experience and diversifies knowledge. Even for the small business owners in Canada it is highly recommended and advisable to purchase the accounting software which will prepare the financial reports in a proper manner on a monthly basis which can depict the financial aspects of the business for the month.
Even certain programs such as QuickBooks software or simple accounting is indeed plays a same role and is highly recommended for the small business owners in Canada. These programs of preparing right and beneficial financial documents are helpful only if your business possess the right and capable bookkeeper that will manage the things efficiently with the proper utilization of these accounting software programs. These programs work efficiently and produce reliable results if it is managed by a capable person.
To run the small business in Canada effectively another major aspect is to have effective financial controls that will lead to proper and desired results. If they are not managed properly it will lead to unreliable and disastrous results. Some of the examples of financial controls in small businesses are:
- Keeping the receipts of the purchase made in the company in order to have a proper knowledge about the cash used.
- It is important to have a separate business account for the deposits and business expenses so that an overview of the financial growth can be easily depicted.
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Congratulations! For adding another achievement to your business, you are able to take it to the level you want. Over the years you may not have made any drastic changes in the way you do business, but you have to keep track of the changes made by the tax department. Here are some Tax Saving Tips and plans that can be beneficial for you. To withdraw full benefit from corporate structure you need to understand the following parameters:
- You should keep a record of all the transactions and make sure to keep track of supporting documents. One of the good accounting practices is to keep a record of all the transactions. This will enable you to keep track of your expenses, revenues, and net income.
- If you are already occupied and don’t have time to do all the calculations, make sure to keep record of – receipts, invoices, deposit slips, agreements, bank statements, letters from WSIB, CRA and other.
You should also have all the documents pertaining to the foundation of your company, minute book, and articles of incorporation. You need to have some evidence in order to support you case in front of CRA, therefore you need to have some documents at your disposal. You need to prepare before hand in order to take care of this, the best way is to store all the related documents of your business activity.
Some tax saving tips and plans for families are as follows.
- Everyone is looking for ways to reduce tax, as it is a considerable burden on many families. Families can include their child care expenses in order to save tax. There are two ways to do this. Flexible spending account is the first option. You can reduce taxable income through your employer sponsored accounts. It contributes to expenses towards your child care on the basis of pre-tax.
- The second option is to claim the expenses on your child care and use it to deduct taxes at the end of the year. Many parents are not aware of the fact that the money spends on summer day camps for their kids can be used to save tax.
- If the main reason for your child attending summer day camp is that you are going to school or work, than the money spend on these camps can be used to save taxes. Camps are entertaining and fun, and this fact does not eliminate them from tax deductibles.
Tax saving tips and plans through health care are another option to save tax. Flexible spending account for health care expenses can be used to deduct tax in a given year. It is important that you keep track of all your health care expenditure; this also includes the medications you purchased in a given year. You can get a reimbursement for your medical expenditure, if you have a flexible spending account.
These are couple of tax saving tips and plans that can help you immensely in saving money.
Tax Planning is indeed a very important key area for the development of strong business foundation. To lay down the strong foundation of any business it is very much essential to plan for the tax effectively which can result in the gains and growth of business in a very short span of time. It is therefore one of the essential aspect for the business to develop financially.
Planning for each business should be done in a proper and regulated manner irrespective of the size of the business. It is mandatory for every business to be a tax payer and implements the proper strategy of the Tax Planning. It can be quite complex and tedious if the tax is not planned and managed effectively as the whole foundation of the business depends upon these financial aspects.
It is therefore advised to the business owners not to depend on any inadequate advice on Tax Planning as it can result into something disastrous. Adequate and proper knowledge of the tax is very much essential before planning it for the business and applying it in order to achieve optimum results for the business.
It is often advised and suggested to the business owners to seek the advice about Tax Planning from expert having adequate and sound knowledge of the subject and latest advancements in the tax planning as well which can further help you to reap the benefits of the sophisticated tax planning which results in high profit margins.
Financial and Tax Planning Services will provide necessary and definite help for every business to grow successfully in a regulated manner as these services are quite essential in order to calculate the taxes accurately and will even provide you the streamlined approach of planning your tax as well as finances in a best possible way for your business.
It is important for every business owner to keep an eye on the latest changes and updating that is happening in the taxation laws which ensures better and effective tax planning and even ensures tax savings. This complex task can be made easier only if you seek the proper advice of the tax consultant having wide experience in planning tax and have a proper approach of even implementing it. Business owners to carry this tedious task in a disciplined and regulated manner hire professional services which ensure proper tax planning as well as tax returns. It is their responsibility to fill the form for the tax returns in a particular span of time.
These expertise professionals will prepare the required documents of filling the right form of taxes in a correct manner and further apply their analytic skills and approach to implement the same in the area of tax planning and tax savings. Financial services is another major aspect which plays a key role in bringing success and growth to the business and will even aid the business to be aware of the latest advancements happening in the taxation industry in a lowest turnaround time.