Tax Tips for the New Year

tax timeFor most people at this time of year thoughts turn to the Holiday season and spending on gifts, family gatherings and perhaps travel.

If you are an entrepreneur or run a small business, your thoughts are on payroll, possible bonuses and getting that last sale in to make your year end look great.

Not many people are thinking about taxes, they may think about RRSP’s and know that the deadline is February, but most thoughts are on cash flow.

Tax planning is an important area of cash flow. When you do your taxes in April or July or 6 months after your year end, there usually is some tax owing. Will you have enough cash flow to pay the taxes when they are due?

A couple of tips to make sure there isn’t a shortfall.

  • Are you putting money away regularly for RRSP’s to cover personal income?
    Can you take advantage of the new income splitting rule if you have children under 18 and a spouse with a lower income level? Do you pay your income as payroll or as a dividend?
  • If you do all your bookkeeping yourself or take it to the accountant at tax time, chances are there will be a rude awakening of how much tax is due and at that time there are no alternatives that can be done. Know and understand your financial statements. Keep them up to date monthly so there are no surprises. Speak to your accountant throughout the year and create a plan.
  • What about any medical expenses during the year? Medical expenses that exceed 3% of the lowest household income and are not covered by your health-care plan can be written off.
  • If you don’t need the money now, resist the temptation to take it out of your business as income. Leave it in your company and it will be taxed at the small-business rate (15% in Ontario), leaving most of it available for investment inside your firm or outside it (such as in stocks or bonds)—or to be sheltered otherwise. But take it out now and it will be taxed at your marginal rate.

Finally something to consider for the future.

Did you know?
Government of Ontario will be forcing all small businesses to set up an Ontario Retirement Pension Plan starting in 2017. This is proposed at 1.9% of wages up to $90,000 max wage. This will be deducted by the employee and matched by the company. Thus, a employee would pay $1,710.00 off his pay at the maximum salary and the employer would match this $1,710.00. If you already have a plan, opt out provisions are available to this new plan. It might be a wise idea to look at Individual Pension Plans and Group RRSPs and set one up. CARAHS Protection can help with this. Need more information we would be happy to talk to you about Pension Plans.

Have a Great Christmas season and know that we are always working in the background to make sure you have the solutions  you need to help your small business grow.

Monica Olenroot
monica@carahs.org

1-866-366-2930

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