It’s coming up to that taxing time of the year again.
We should have no issues with paying our fair share of income tax to support the services governments provide.
But we should also not be reluctant to claim every legitimate deduction and use every legitimate strategy to keep our tax bill as low as legally possible.
Consider the following steps:
Research: Go online to find easy-to-follow tax tips checklists. Most of Canada’s major accounting firms provide handy lists.
Review: Go over your 2017 tax return to see which deductions and credits you didn’t claim. Might you be eligible for some of them for 2018?
Deduct: Did you pay family members to work in your sideline business – and that can include revenue property? Deduct those payments (which should be documented and the same as you would have paid a non-family member to do the same work) if that will shift the income from your higher to their lower tax bracket.
Also, deduct expenses incurred in earning sideline and business income – provided you have a “reasonable expectation of profit.” Separate tax avoidance (legal) from tax evasion (illegal). If in doubt, and especially if a large amount is involved, perhaps get expert advice – but choose an advisor who is willing to take a research-based (read “assertive”) approach and who has explained any risks to you.
File on time: Even if you owe money you can’t afford to pay, file by the April 30 deadline to avoid any late filing penalties. At the same time, contact the tax office to explain why you can’t pay on time and propose a repayment schedule you can afford.
Don’t cheat: Computer matching can reveal income (including from outside Canada) you have received but not reported. Disgruntled family or business acquaintances can tip off the tax office.
Know your rights: Read the Canada Revenue Agency Taxpayer Bill of Rights especially if you end up dealing with the CRA.
Mike Grenby is a columnist and independent personal financial advisor; he’ll answer questions in this column as space allows but cannot reply personally - email firstname.lastname@example.org