Income Tax saving tips for your online business
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Income Tax saving tips for your online business

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Five Star Tax Service Online Income Tax Tips. www.taxsupport.ca your one stop source for Canada, USA and Cross Border Taxation. These income tax tips are applicable to all businesses and specially ...

Five Star Tax Service Online Income Tax Tips. www.taxsupport.ca your one stop source for Canada, USA and Cross Border Taxation. These income tax tips are applicable to all businesses and specially businesses operation on line. It is important to keep detail record of all expenses so that you can offset some of your income and lower your tax rate. Tax in most countries are progressive. These income tax tips will help you reduce your marginal tax rates. Moving from a higher marginal tax rate to a lower marginal tax rate means savings of thousands of dollars in taxes.

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  • There are indirect and embedded tax already added in the cost of the meal.
  • Business Owners can deduct all their business exp. From their annual income to determine the net income.
  • From T2125. Statement of Business of Prof. Income. You can report your Revenue. Operating Expenses. Business use of Home Exp. Car Exp. Capital Expense, Equipment Etc.
  • Revenue is the sale proceeds of your Business. In tax reporting, it is your income.. Not your Taxable income. From revenue, you will deduct ALL allowable business expense to determine taxable income.
  • Couriers/Bike Couriers can claim upto $17/day without receipts. Long Haul Truckers can claim 50% of meal Exp.
  • Any improvement, fixed to the property and becomes part of the structure are capital improvement.
  • Must Keep KM log and records of all expenses. If the car is purchased rather than leased, a Capital Cost Allowance/Depreciation cost is allowed.
  • If you are renting, you should claim all home expenses. If you own, you need to be careful to claim business use of home expense. If you are planning to sale the property, your capital gains will be affected by your home office claim.

Income Tax saving tips for your online business Income Tax saving tips for your online business Presentation Transcript

  • Tax Saving Tips for Your Online Business More Money for You, Your Family and Your Business
  • What is Tax?
    • Cost added to product and services without any DIRECT BENEFIT to you.
    • Tax revenue is used to pay for management of government, infrastructure development, social services, etc. where, you might or might not have a direct input how the money should be spent.
    • It is important that we all should pay our FAIR share of tax, no more or less.
    • In Canada there are over 65 types of taxes levied on us.
    • Tax is levied on many disguises – Direct Tax, Indirect Tax, Embedded Tax, Fees, Duties, Surcharge,
  • Some Unusual Tax
    • Carbon Tax? Poverty Tax? Homeless Housing Tax? Access Fee? Tree Cutting Tax? Airline Fuel Tax? Airport Security Tax? Road Safety Tax? Occupancy Tax? Marriage Lic. Fee? Health Care Tax (MSP)? Excise Tax? Luxury Goods Tax? School Tax?
    • If you take account of all the taxes you pay, it could easily be 50% of your income goes to pay some form of tax.
  • Your Real Disposable Income
    • Salary/Income 2500/every two weeks
    • www.cra.gc.ca/pdoc
    36% 34% Real Income Tax 38,145.12 39,725.28   Your Disposable Income 21,854.88 20,274.72 Annual Tax 60,000.00 60,000.00 Annual Income       1,821.24 1,689.56 Monthly Tax 3,178.76 3,310.44 Real Income (381.00) (397.00) Consumer Tax (HST) 3,559.76 3,707.44 Net Monthly Income (1,440.24) (1,292.56) Tax at Source 5,000.00 5,000.00 Monthly Gross Income       1,779.88 1,853.72 Net After Tax (720.12) (646.28) Total Tax at Source   (43.25) EI (234.18) (117.09) CPP (129.00) (129.00) Prov. Tax (BC) (356.94) (356.94) Fed Tax 2,500.00 2,500.00 Income For Self Emp For Emp  
  • Canada Revenue Agency
    • Federal Tax Agency for collecting Tax Revenue.
    • Can Garnish Your Wage
    • Can Freeze Your Bank Account
    • Can sell your assets for Tax Collection
    • Can asses your Tax, if you fail to file your return
    • http://www.cra-arc.gc.ca/nwsrm/cnvctns/menu-eng.html
    • Each Province has there own Tax Agencies to manage Provincial Taxes.
  • Tax Rates
    • In Canada, while most of the tax rates are fixed, only income tax is progressive. Tax rate varies with level of income.
    • Combined Federal and Provincial Tax could be as high as 42% and as low as 20%.
    • By Tax Planning, even if your income is at 42% tax rate, it is possible to bring down the tax rate to 20%, leaving 22% of your money with you for your family and business. Income Tax is the only tax, that you can plan and decide how much you want to pay or save. HST is other tax you can plan, how much you want to pay. All other tax are imposed directly or indirectly, and you must pay.
    12.29% $82,014 -$99,588 29% above $126,264 14.70% above $99,588 10.50% $71,433 - $82,014 26% $81,452 -$126,264 7.70% $35,716 - $71,433 22% $40,726 -$81,452 5.06% upto $35,716 15% upto $40,726 Prov. Tax Rate Income Fed Tax Rate Income
  • Not So Fun Facts
    • Cost of a $100 Restaurant Meal
    127.00 After Tax Income 198.43 Before Tax Income (Your Cost) 71.43 Tax Rate 36%     127.00 Total (after Tax) 15.00 TIPS 12.00 HST 100.00 Cost of Meal
  • Your Online Business
    • Product or Service
    • Business Structure
      • Sole Proprietors (Most Self Employed)
      • Partnerships
      • Corporations
        • BC
        • Canada
        • US Corp., LLC’s
    When starting a business keep costs low, so that you have money to spend, running your actual business.
  • Record Keeping
    • http://www.cra-arc.gc.ca/tx/bsnss/tpcs/kprc/menu-eng.html
    • When you start a business in Canada by law you are required to keep financial records.
    • Beside the law, you need to keep financial records to measure profitability, decide on pricing, expansion or quitting.
    • Record keeping is important to do accounting and financial statements of your business and to know your Profit/Loss and Tax liability.
    • Tax on business is imposed on Net Profit.
    • Net Profit = All Revenue – All Expenses.
    It is very important to keep your personal and business finances separate and keep detail records of all business related expenses.
  • Your Real Disposable Income
    • Salary/Income 2500/every two weeks
    • www.cra.gc.ca/pdoc
    36% 34% Real Income Tax 38,145.12 39,725.28   Your Disposable Income 21,854.88 20,274.72 Annual Tax 60,000.00 60,000.00 Annual Income       1,821.24 1,689.56 Monthly Tax 3,178.76 3,310.44 Real Income (381.00) (397.00) Consumer Tax (HST) 3,559.76 3,707.44 Net Monthly Income (1,440.24) (1,292.56) Tax at Source 5,000.00 5,000.00 Monthly Gross Income       1,779.88 1,853.72 Net After Tax (720.12) (646.28) Total Tax at Source   (43.25) EI (234.18) (117.09) CPP (129.00) (129.00) Prov. Tax (BC) (356.94) (356.94) Fed Tax 2,500.00 2,500.00 Income For Self Emp For Emp  
  •  
  • Revenue
    • Sale of Products/ Services and Receive Payments:
    • Online Payments – Paypal, Google Checkout
    • Interac Debit, Moneries Credit
    • Cheques
    • Cash
  • On Line Sales
    • When you are selling on line, must take into account of your cost of goods sold.
    • CRA is requesting information from Ebay, Amazon, Paypal about Canadian account.
    • If you have online business, for Tax purposes, consider it just like running a regular business, taking account of all business expenses.
  • Expenses
    • Advertising/Marketing
      • All expense related to promoting your products or services.
      • Business Card / Flyers / Website /On Line Ad / SEO / Web Designer / Networking / Press / etc.
  • Expenses
    • Meals and Entertainment
      • Meeting with customers / vendors to explore business opportunities.
      • Meeting with business partners / peers
      • 50% of M&E is allowable business exp.
  • Expenses
    • Bad Debts – When customers do not pay
    • Insurance – Business Insurance, Owners Life Insurance, Health Insurance etc.
    • Interest – Interest you pay on Loan / Credit Card Charges / Bank Overdraft for business use.
  • Expenses
    • Business
      • License (Registration/City)
      • Fees (Bank/CC)
      • Dues (Chamber of Commerce/ Biz Entity)
      • Memberships ( Prof. Membership Fees)
      • Subscriptions (Industry Journals / Newspapers/Magazines)
  • Expenses
    • Office Expense – Useable expenses, water, coffee, small office items pins/clips.
    • Office Supplies – Papers, Ink, Pens, Stationeries.
    • If supplies are issued for delivery or manufacturing of products or services, they are part of COGS.
  • Expenses
    • Professional Fees
      • Accounting
      • Publicist
      • Consultant/Coaching
      • Legal
  • Expenses
    • Management Fees – Owners / Managers Withdraw
    • Salary / Wages / Casual Labour
    • Employee insurance / Benefits
  • Expenses
    • Rent – Office / Storage / Studio
    • Property Taxes – Triple Net (commercial rent)
    • Maintenance / Repair – Leasehold Property Improvement to run the business.
    • *Not Capital Improvement
  • Expenses
    • Travel
      • Airfare / Car
      • Lodging
      • Meals (50%)
      • Emergency Travel Exp
  • Expenses
    • Telephone – Land Line / Cell / VOIP / 1 – 800 number (business use)
    • Utilities – Water / Heat / Internet /
    • Postage – Canada Post/ Fedex/UPS
    • Fuel Costs – Landscaper
  • Expenses
    • Automobile –
    • Leasing Cost/Interest
    • Fuel and Oil
    • Insurance
    • Lic. & Registration
    • Maintenance
  • Expenses
    • Business use of Home Expense
      • Heat
      • Electricity
      • Insurance
      • Maintenance
      • Strata fees
      • Property Taxes
      • Mortgage Interest
  • Expense
    • Specific to online business
      • Secured payment site
      • BBB membership
      • Trusted website
      • Special software license for online shop
      • Online product sourcing/research/sample review
      • Cost of damaged/expired products
  • Tax and Cash Flow
    • Easiest way to increase your cash flow is by planning and reducing your tax liability.
    • If you miss to claim an expense item to claim allowable tax credit, you are paying too much tax.
    • If you are in 36% tax bracket, for every $100 you can claim in expense will save you $36 in taxes, that is money in your pocket.
  • Work Smart
    • Tax is progressive. More income means more tax.
    • Tax planning will help you boost your disposable earning at the present income level.
    • Work less, spend more time with your family, have more time to do what you love.
  • Questions? www.taxsupport.ca [email_address]