I am a tax return preparer and tax expert.  Most importantly, I can save you money through applying smart tax strategies that I have compiled over the years.

If you’d like to reduce the taxes that you pay, please pay close attention to the following smart tax strategies.

Deduct income tax preparation fees

Fees paid to an accountant for income tax preparation are deductible on your personal income tax return, under the following circumstances:

-          If you have investment income from stocks, bonds, mutual funds that you have reported on your personal tax return

-          If you have a rental property

-          If you are self employed

Therefore, make sure to hold onto your receipt for income tax preparation Toronto and you’ll be rewarded with a nice tax deduction come April 30.

For additional tax deductions for employees, please see Accounting Firm Toronto – How To Beat The Taxman

Set-up in trust accounts for children

An in trust account is simply a bank accountant that is opened for the purpose of saving money for your children.  They’re great for depositing cash gifts that your child has received and for extra cash that you have and would like to stock away from your children.

There are some important tax considerations when opening an in trust bank account:

• If you deposit your own money into your child’s in-trust account, then any investment income earned on that money will be included in your taxable income.  However, capital gains will not be attributed back to you.  Therefore, it’s better to purchase mutual funds or stocks in your child’s in trust account, because these types of investments tend to generate capital gains.

 

• When you open an in trust account for your child, you must make an initial deposit.  If you made the initial deposit, then you cannot be the trustee for the account.  The reason being is that if you are both the initial contributor and trustee, then any income or gains realized by your child will be included in your taxable income.  The easiest way to get around this is by making your spouse the trustee.

 

• You should certainly consult with an expert in income tax preparation Toronto, before opening up an in trust account for your child.

Take your bonus next year – income tax preparation Toronto

Telling your boss to push your bonus to early next year instead of now seems counter-intuitive, especially when that money could come in handy during the holiday season.

However, this is a great tax savings strategy, because by taking your current year bonus at the beginning of the following year, that will mean that the bonus will be included in following year’s  taxable income.  In other words, you would have saved a lot in taxes, because your current year’s taxable income will be reduced significantly.

Withdraw money from your RRSP when you have little or no income

 

It’s not advisable to withdraw money from your RRSP because you are reducing your retirement nest-egg, and because RRSP withdrawals are included in your taxable income in the year that they are withdrawn.

“Timing the withdrawal of your RRSP’s can make a huge difference in the taxes that you pay,” says expert in income tax preparation Toronto

However, if you are forced to withdraw money from your RRSP’s because of financial hardship or other reasons, it’s better to do so in a year where you have a small or no income.  That way, you will pay less in tax, because your income tax rate will be much lower.

For additional RRSP strategies, please see Accounting Firm Toronto – How To Beat The Taxman and Accountant Toronto – 5 Secrets to Saving Taxes for Canadians

Become an independent contractor and not an employee

Independent contractors have far more tax benefits and tax write-off’s than employees, because as an independent contractor you are considered to be self-employed.  As a self employed person, you can deduct expenses such as:

-          Your home office expenses

-          Car expenses

-          Meals and entertainment

-          Computer and equipment

-          Telephone and internet

-          Other business related expenses

Additionally, self employed persons don’t have payroll taxes deducted from their cheques, which is another big tax advantage over an employee.

Changing your status from employee to independent contractor involves more that modifying your contract with your employer.  To be identified as an independent contractor by the Canada Revenue Agency for tax purposes, you must:

-          Be able to exercise control over the work that your perform

-          Have ownership of the tools required to do your work (e.g. laptop, telephone, etc.)

-          Take on financial risk

-          Have an opportunity for profit

As this is a complex area of tax, you should certainly consult with an expert in income tax preparation Toronto.

For more information on saving taxes for the self employed, please see How to save taxes for self employed in Canada

About the Author – Income Tax Preparation Toronto – Contact Us Now

 

Allan Madan is a Chartered Accountant, Tax Expert and experienced Income Tax Return Preparation Toronto, Ontario, Canada.

Allan enjoys helping his clients (investors, employees, corporations and the self employed) save taxes.

To learn more about Allan Madan, please see Income Tax Preparation Toronto

Tags: tax tips

This entry was posted on Monday, September 13th, 2010 at 9:32 pm by superAmin and is filed under Tax Tips 2010. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.