5 Tips to Help Freelancers Prepare for Tax Season

Tax season can be a nightmare for freelancers and small business owners. But, with proper preparation and a little help, it doesn’t have to be so painful. Here are our tips to help you prepare for smooth sailing all the way through to this year’s tax deadline!

1. Track Your Expenses

The single most important thing you can do as a freelancer to help prepare yourself for tax season, is track, track, track and track some more. From income to expenses, to HST/GST that you charged and HST/GST that you paid, it’s all important information to have organized and at your fingertips prior to tax season.

There are many ways you can do this. Your first option is to track yourself. You can do this with an excel spreadsheet or accounting software. But, as your business grows it is worth considering hiring an accountant or bookkeeper.  This is a great way to ensure that tracking is done properly by a certified professional with experience. Ultimately, it helps make tax season a breeze.

2. Think Ahead

 Many freelancers get blindsided by income tax in their first year of business because they weren’t thinking ahead. Avoid this mistake by setting aside about 30% of your revenue into a savings account each month. This will help you slowly chip away at the income taxes you will likely owe come April instead of scrambling to pay them at the last minute.

3. File Your Taxes On Time

Speaking of tax season, don’t forget important deadlines. The standard Canadian tax deadline is April 30th. If you are self-employed the deadline to file your taxes without penalty is June 15th. Keep in mind, however, that you must ensure that you pay any taxes owing by April 30th. Make sure that you abide by these deadlines so you don’t end up paying interest or penalties on what you owe!

4. Invest!

Investing is a great choice for many reasons. Not only will it help you build up a nest egg but, it’s also an efficient way to lower your income tax bill! Income that you invest into an RRSP is sheltered from taxes. It’s a smart decision all around!

5. Hire A CPA.

As your business grows it is a good idea to look into hiring a certified professional accountant or CPA. They can help you discover tax breaks, credits and deductions you didn’t know you were eligible for. They can also help you identify what you can claim as an expense and what you cannot. Finally, they can help you keep everything organized and balanced.

 

There are lots of ways to ensure that tax season isn’t a nightmare for the self-employed. Of course, our favourite way is Taxvisors!

If you are looking for help with your personal and business taxes please contact us today!

 

Tax Brackets and Its Significance in Your Financial Dealings

 

Have you ever tried computing your approximatetax accountant mississauga, accountants mississauga, mississauga accounting firm, bookeeping mississauga, incorporation mississaugabracket?  Tax bracket is the estimated tax rate that an individual may be taxed according to different income levels. People pay taxes every year and those who make the least amount of money belong to the lowest tax bracket, which means that they owe the least marginal tax rate. Individuals who make more money, have higher tax bracket therefore paying higher marginal tax rate.

 

Knowing the tax bracket is an important element in computing the marginal tax rate. Here are the advantages you can reap when you know how to derive your marginal tax rate.

 

Requirements in Financial Transactions

 

Knowing the rough estimates of how much your tax may poses advantage in financial dealings. For example, in opening a bank account the banks would usually ask which tax bracket the depositor belongs. If the person knows the number, it is easy to pursue with such transactions and imply expertise on such matter.

 

Assessment of Tax Impact

 

The most common mistakes in most taxpayers is not knowing their personal tax. Oftentimes people buy a lot of things, not knowing the impact of taxes as they buy. For example, if you mortgage a house without knowing the tax interest, you could be paying the tax more than your mortgage price.

 

Although a tax bracket will not tell your exact personal tax, it can also help you assess the tax impact of whatever financial decisions you will make. Let’s say your tax bracket is around 35%, this means you could save 35 cents in federal tax for every dollar spent on tax-deductible expense such as mortgage or charity.

 

Safe Investments

 

Individuals who are planning for a business must know all aspects of taxation. Indeed, it is very easy to give out money, with the variety of investment luring from left to right. But just like any other financial dealings, investing without knowing how much tax you might owe can leave you in financial roller coaster ride in the long run.  When you know your tax rate, you can identify which type of investment you would most likely be successful. You will know which account and what situation it can fit best.

 

The tax bracket information can help structure a good investment portfolio and determine the value of certain deductions when filing for tax return. Aside from that, knowing being informed helps one know whether favoring tax payments on invested dollars would be beneficial. If it is not, then you can dodge the tendencies of investing on something that doesn’t give positive returns.

 

Investments are one of the most critical decisions a person can make in life. A lot of people have been left hanging in a financial dilemma because of poor decision making. Hence, when planning for such things, you could do it better when you have the idea of knowing your tax bracket.

 

Business Tax vs. Business Income Tax: What you Need to Know

 

Operating a business gives you a handful of dealings in terms of taxes. The form and type of the business you operate determines what taxes you must pay and how you are going to pay them. In this article, you will learn the two types of taxes that most business owners pay and the difference between them.

 

Business tax is the pecuniary value imposed on your business by law which is collected annually. The tax rate can depend on the tax regulation in your state as part of its revenue-generating mechanism. Business income tax is entirely a different thing. In running a business you need to account for income tax on your profits less the deductions that you can get in a specific tax year.

 

Can you evade business taxes and business income taxes? The answer is No. What most business owners often mistaken is thinking that they can be excused for not paying taxes, therefore intentionally avoiding the payment of yearly taxes.. In result, the business owner can be penalized for such act.  A person may be able to avoid payment of huge taxes by starting off with a small business, rather than building a full blown business for startup.

 

The perk of being a small business owner is that a person is able to deduct business expenses from the taxable income. These deduction somehow soften the blow of having to acquire tools and materials needed for business operations such as computer, office supplies, health insurance, and retirement benefits.

For instance, your marginal tax bracket is 25 percent, if you purchase a computer for $1, 000, you can get a tax deduction of 25 percent allowing you to cost only $750. Oftentimes business owners also overlook some potential tax deductions such as those itemized deductions provided in the state regulation.

 

It is imperative not to get carried away with purchasing things for your business though, just because you have tax deductions. You need to understand that tax deductions are not designed to make your business free. It is imposed by the government to allow businesses to elevate despite the burden they have.

 

Tax deductions can only apply for those things that are badly needed for your business operations. However other things that are for pure convenience and luxury cannot be added. The higher the income of your business, the higher your business income tax will be.

 

Being a responsible business owner and tax payer can often save you from extreme financial dilemma especially during times of assessment. When you have paid your business taxes, it means your business will be free from penalties should you miss your taxes intentionally.

 

Now that you know the difference between business tax and business income tax, including tax deductions there is no more reason why you would want to delay or evade payment of taxes. While it is true that taxes can really be expensive, the slips of paper you cram in your office drawer can help you a lot.