If you are only an employee, it is most likely you will have some return when filing your income taxes. The story is quite different when you are a sole proprietor or partner of a non-incorporated business.
If you google a little, you will find that sole-proprietorship is the simplest way to start a business. It has pros and cons. You become the business (the person). Your business earnings are your personal earnings, and some expenses can be claimed as the business'.
The catch here is that if you are good on business your income will be way bigger than the expenses you can write off. This means that at the end of the year, you may have a surplus of 70k or more. This means that the CRA will require you to pay around 20k (approx) of taxes.
Try to Write Off as much as Possible
There are many ways to make that quantity smaller, some of the tricks are:
- If married, you can make your spouse owner of the business around the 41-42 % (use a program like Turbotax to do the calculations and look for the right equilibrium point).
- If married, and your spouse is co-owner of the 40%+ of the business, you do not need to pay EI premiums. Therefore, you save that money.
- If you have a teenager (14+), you can employ him/her. Underages are not entitled to CPP as far as I know.
- Put some money in your RRSP account (and your spouse's if married). You will need to do some calculations here because this money won't be liquid. The best way is to see how close are you to the next lower income bracket and then see if you can afford to put the difference to reach it.
Negotiate an Arrangement
If after that, you still owe a big amount and you don't have the cash to pay right away your taxes, don't cry! There is a way. The Government of Canada is willing to negotiate payment arrangements.
You just need to call the CRA's TeleArrangement service at 1-866-256-1147 and do a negotiation. Be ready with your notice of assessment, you will need it. Once you do the arrangement, you just need to honour your promises. I was told that if for a reason I wouldn't make it, I shall call them because they will send me to the collection service right away.
So, what kind of arrangement I got? Good question, without giving you many personal details, my 2018 income taxes are split into 12 payments. With the interest rate of 6.51% and first payment starts on May 31st, 2018.
6.51% is kind of a normal rate. A bank guy told me that for car credit, banks are giving as their lower offer 5.99% interest rates. So, I believe it is fair.
Good luck with your taxes!blog comments powered by Disqus