Chartered Accountant Oakville Provides Expert Tax Advice
Many business owners are too busy with managing the day-to-day operations
, that they often don't pay much attention to taxes. This is somewhat troubling, because income tax is one of the biggest expenses for any business owner. Allan Madan, a Chartered Accountant in Oakville, shares his tax expertise on how to reduce income tax for your small business, by taking advantage of 5 simple tax tips.
#1 Incorporate Your Small Business
Corporations in Ontario, Canada pay a very low income tax rate of 16.5% on business profits. In comparison, individuals in the highest income tax bracket pay income tax at a rate of 46.4%. Therefore, by incorporating your business you can save almost 30% in taxes. Allen often recommends clients to incorporate their business in order to minimize taxes.
#2 Pay Salaries to Family Members
Paying salaries to family members, who are in a lower tax bracket than you, is a good way to reduce taxes. If you have children who are not working, you could pay them a salary of up to $10,320 per year without having them pay a single cent in tax.
Note that the salaries paid to family members must be reasonable. Therefore, you couldn't pay your 12 your old son $50 an hour for data-entry work, for example. In addition, you should keep detailed time sheets to record the hours worked by your family members. This will help justify the salaries paid to them, if challenged by the Canada Revenue Agency (CRA).
You should speak with a Chartered Accountant to determine if this tax strategy is appropriate for your business.
#3 Family Trusts Helps Reduce Tax
If you have assets that are appreciating in value, you should consider placing them in a family trust. Common examples include shares of your company or real estate. The benefit of utilizing a family trust is that any future growth in the assets will accrue to the beneficiaries of the trust (e.g. your children and spouse). That accrued growth in value will only be taxed in the event of the death of the beneficiaries or on the sale of the assets held by the trust.
In addition, a family trust is an excellent way to split income with family members. For example, if a family trust owns your company's shares, then you could strategically have your company pay a dividend to the family trust, which would then in turn distribute that dividend to each of the beneficiaries of the family trust, who would presumably be your family members.
Allan Madan a Chartered Accountant with an office in Oakville Ontario Canada, has worked with many clients in setting up family trusts for them.
#4 Purchase a Car through Your Corporation
If you are planning on purchasing a car to use for business purposes, Allan recommend's that you purchase that car through your corporation.
Firstly, the car will be purchased with corporate dollars. This is much more efficient that paying yourself a bonus, a large portion of which will be remitted to the CRA in the form of payroll taxes, leaving you only with a much smaller amount to put towards the purchase of a car.
Secondly, your corporation can pay for all of the car's operating expenses, including finance payments. Again, this is much more tax efficient than having to pay for car expenses with your after-tax salary.
Before undertaking this tax strategy, Allan advises to speak with a Chartered Accountant first.
#5 Tax Free Savings Account
You should consider opening up a tax free savings account. As you can infer from the name, any money invested inside a TFSA is not subject to tax and neither are withdrawals from a TFSA. The maximum amount that you can contribute in any given year to a TFSA is $5,000. Oakville Chartered Accountant, Allan Madan shared, that he not only recommends the TFSA but has personally invested in it as well.
by: Phillip Maguire
How To Improve Your Tax Planning Overview Of Federal Tax Extension Forms Choose And get Nfl Jerseys Are You Liable To Tax On The Termination Package Offered In Your Compromise Agreement? Are Your Back Taxes Getting You Down? Apply For a Settlement With the IRS! Need IRS Tax Help? The Solution to Your Tax Problem Using a Tax Attorney to Help With Back Taxes How to Get IRS Help and Income Tax Relief watch Indianapolis Colts vs Houston Texans Live NFL Stream watch Atlanta Falcons vs Pittsburgh Steelers live NFL Stream Getting IRS Tax Relief Support IRS Tax Relief Option That Works Mo Brooks for Congress 5th District Alabama on Taxes. Video 2