|
 I have seen this problem often this year. Self-employed people who end up with a much larger tax owing than they expected. They looked at their previous year's tax return and based on that, they thought it would be just a little more, but they were wrong.
The Problem
You get to year end, and find you have a huge amount of tax owing. You look toward your tax person and they ask why did you not come in to see them earlier. This all could have been avoided. Now you have to take out loans in the tens of thousands to pay Revenue Canada. It could take you years to get sorted out of this mess!
Not Linear
The key thing is that tax is not linear. It is not proportional to your income. You cannot assume that if you paid $2,000 tax on $29,000 income that you would owe about $4,000 on $60,000. It does not work that way.
A lot of important things to do with tax have a minimum threshold before they kick in, for example: - CPP, the first $3500 is exempt.
- Personal income tax has a personal exemption of $9,600
- GST does not kick in until you earn over $30,000.
So as your income increases, taxes increase in a non linear fashion.
You might have some good deductions, which means you offset your income against such deductions. But once you exceed those deductions, the tax kicks in again. And don't assume that you will be able to find the same deductions every year. For example a contractor buys tools one year and claims a deduction for them. The next year he already has those tools so does not claim a deduction again. It is important not to forget that. And don't assume your expenses will grow with your income either.
The Solution
Don't wait until year end to focus on your taxes. By then it is too late to make any adjustments. You should see your tax advisor on a quarterly basis to determine where you are at. Together with your tax advisor, you can work out a plan to keep you on track. For example, you can submit GST on a quarterly basis, which is a common requirement. If you keep it until year end, you risk paying penalties and interest, plus there is the substantial risk that you will spend it. You can make pre-payments towards your end of year income tax. Those people who work in a job have their income tax deducted at source, which means it is collected throughout the year. There is too much risk you will spend the money during the year and be faced with a huge bill at year end. Your tax advisor can help you decide on how much to pre-pay. So go talk to your tax advisor and set up a schedule today... Pat
|
XsnTEbNRtwTw
Written by 'Guest' on 2012-02-03 22:19:26
June 3, 2011 at 2:25 pmFrom a cmesuonr point of view most would probably agree Trevor but speak with a builder and youll hear their side of the story regarding contracts and knowing both sides of the fence, I think its fairly balanced between the two.Each building contract has a time to complete clause which must be nominated. In fairness to the builders they are allowed to claim for extensions of time under certain circumstances. EG: If a client decides to alter the works the builder can request an extension or if the client delays progress through late supply of goods and materials the builder can request an extension.Many other factors can cause extension requests such as; Vandalism, theft, adjoining neighbour disputes&. the list goes on.The one area where most owners complain about the builders delays is the clause where there is a delay in the supply of materials, transport or labour.To use an example that I was once involved in; As a builder we had ordered stock of ceramic tiles that were being shipped from Italy the tiles were ordered 3 months in advanced and arrived at the docks 1 week ahead of schedule. However the unions stepped in and there were disputes on the docks which affected the tiles being released by over 9 weeks.Is the builder to blame? Would it be fair on the builder to pay a penalty for something that is totally beyond their control? No. Its also not the owners fault either. Its just an unfortunate event that affects both the builder and the owner (builders dont make money unless theyre building).One of our services that is probably understated on our website is our pre-qualification of home builders. This saves our clients a lot of headaches when it comes to reliability, honesty and quality. Reply | XMHzPRjIk
Written by 'Guest' on 2012-02-05 09:20:38
8tPMjM rhiyamszlfpm |
|
