10 Smart Canadian Tax Tips

Hey! If you are in age of getting retired and want to be financially independent while living in Canada, you need to act smarter. You must have seen how people who even do not make a lot of money stay relaxed and get benefited while others who earn a lot just are getting by. This is actually being the matter of smarter and wiser.

People act smartly, have an eye on the tax implications, interest, returns and then take decision. Apparently it seems very difficult to make the right decision for the survival and being secure from heavy tax yet this is very easy in real. You just need to be decisive.

Your income tax planning and financial planning must go side by side. There are number of available online calculators helping you to take out the real percentage as per to the tax applied and deduction which really makes your job easy.

One thing is sure that you must keep your records in hand. Canadians who filed their income tax and benefit return electronically or who have not enclosed their information slips and receipts with their paper-filed return should keep their tax and benefit records on hand in case they are contacted by the Canada Revenue Agency (CRA).

After returns are filed, the CRA begins work to verify reported income, as well as credits and deductions claimed. These reviews are an important method for the CRA to ensure Canadians are paying their fair share of taxes.

Some of the reviews of deductions and credits are done when returns are filed and before taxpayers receive their notice of assessment. However, most reviews take place later in the year, as the CRA works to verify the information on an individual’s return and compare it with information provided by other parties, such as an employer, a spouse, or a common-law partner.

During this review process, the CRA may contact taxpayers, usually by mail, to ask for more information on income sources or dependants. The CRA may ask for copies of receipts or information slips to support a number of different claims, for example:

  • medical expenses
  • charitable donations
  • child care expenses
  • spouse or child support payments
  • moving expenses

Once the CRA is in contact, you have 30 calendar days to respond. Keeping your records on hand makes it easier to respond to these requests and will help you explain your tax and benefit situation to the CRA if you do not agree with your reassessment.

If you can’t pay the full amount of taxes you owe to the Canada Revenue Agency (CRA), you may be able to make a payment arrangement. If CRA determines that you are unable to make a full payment, an agent can work with you to develop a plan to help you pay your taxes.

Receiving a request for receipts or documentation to support certain deductions and credits does not mean you are being audited by the CRA. When an individual is selected for an audit, the CRA tells them that their tax and benefit situation is being reviewed and calls to arrange a meeting to begin the audit.

Canadian Tax Tips for Small Businesses

Do you operate a Canadian small business? This guide presents all the information you need to know about preparing and filing Canadian income tax, from which business expenses qualify as legitimate Canadian income tax deductions through details on completing the T1 Personal and T1 Corporate Income Tax Returns. The Canadian income tax return you need to complete and file for your small business depends on how your business is structured.

If your business is a sole proprietorship or partnership, you report your business income on your T1 personal income tax form. Your small business is you, so to speak, and the T1 income tax return package includes Form T2125 (Statement of Business or Professional Activities), which you will use to report your business income.

If your small business is incorporated, you will report your business income on a T2 corporate income tax return. Legally, your incorporated small business is a separate entity and it needs to complete and file its own Canadian income tax return. (Note that you, as another separate legal entity, will also have to complete and file your own separate T1 personal income tax return.)

Before you sit down to complete your Canadian income tax return or take your tax return and all your relevant forms and documents to your accountant, it’s helpful to know which business expenses qualify as Canadian income tax deductions and which don’t.

Maximize Your Business Income Tax Deductions – This first installment of getting ready to file your Canadian income tax covers keeping track of your receipts, income tax deductions related to the cost of doing business, and income tax deductions for home-based businesses.

The first installment of this series, “Maximize Your Business Income Tax Deductions”, discusses keeping track of your business expenses throughout the year, tax deductions related to the cost of doing business, and home business tax deductions. This article covers automobile income tax deductions, travel-related income tax deductions, tax deductions related to employing your spouse or child and advertising and other income tax deductions.

Once you’ve read through both of these tax articles, you’ll have a complete list of small business tax deductions that you can check before handing your receipts and documents over to your accountant or use to complete your own income tax form – focusing, of course, on maximizing your business income tax deductions. First, let’s take a look at income tax deductions related to vehicles.

The cost of fuel, motor oil, and lubricants used in your business are allowable tax deductions. (This includes gasoline!) You can also claim the license and registration fees, insurance, and the cost of vehicle maintenance and repair as income tax deductions. If you’ve borrowed the money to buy a vehicle, you can claim the interest on your loan as a business expense. If you’ve leased a vehicle, you can claim the leasing cost.

But while there are many business income tax deductions related to vehicles, the catch is to be sure you distinguish between business and personal use when claiming automobile tax deductions. If you have a vehicle that you use for both business and pleasure, you can only claim the portion of automobile expenses related to business use as a business tax deduction. The Motor Vehicle Expenses section of the CRA’s Business and Professional Income Guide gives a good example of how to calculate the deductible portion of your vehicle expenses.

By: Ammarah Khan


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