Commissioned salespeople are often used to mitigate costs and incentivize sales within an organization. While…
Corporate and Personal Tax Summary Planning
By Eeva Harrop, CPA, CA, TEP, MSc.
September 25, 2020
For many individual taxpayers, tax planning means organizing all of your paperwork at the end of the year and filing a tax return before the filing deadline. This method works but often results in anxiety and tax surprises – the most common question a tax preparer seems to get is why do I owe so much in taxes!? The answer often is because you have taxable income on which taxes were not withheld, and the other answer is tax instalments were not made. Taxpayers with recurring annual income such investment income, should make tax instalments!
As a general rule, a financial transaction likely has a tax consequence – most loop holes have been closed! If you are an employee, then your employer will take care of the tax consequences for you as they are required to remit payroll withholdings; otherwise, most transactions do not have tax withheld. So when you receive a payment that will be taxable, the tax will be determined when you prepare your annual tax return. Examples of payments that likely result in tax include:
- Income received from renting a property
- Income received from non-registered investment accounts such interest, dividends and capital gains
- Self employment income
For an individual there are a few common deductions that will reduce taxable income such as making RRSP contributions, deductions from investment counsel fees paid, and credits for donations. So as we enter the last quarter of 2020, here are some strategies that may be worth considering to reduce your taxable income:
- Tax deferral – can you control the timing of income/expenses?
- Income splitting – can income be split among family members so everyone’s lowest tax rates are used? Maybe a prescribed rate loan could be implemented?
- Optimization of tax credits and incentives – are you claiming all the tax credits/deductions you are eligible to claim?
Tax planning can be a challenge at the best of times, and this year has added many challenge; however, planning can reduce anxiety and will allow taxpayers to more efficiently plan for their tax obligations. Our suggestion is to estimate what your taxable income will be for the year, and there are many different templates available. Shajani LLP also uses many different templates to analyze and estimate taxes as well as to effectively plan compensation among corporation groups and their shareholders. Give us a call!
This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. © 2020 Shajani LLP