Tax Tip Thursday

Do You Have to Pay Tax?

A few weeks ago, we talked about everyone having a MyCRA Account. So, I am happy to announce that there has been 100% participation and everyone in Uxbridge and surrounding area has a MyCRA and/or a MyBusiness account now!

I do want to continue our conversation from a couple of weeks ago about expecting refunds/taxes payable.

One of the things that people grapple with especially the last couple of years is how much tax they are going to have to pay in April. COVID has played havoc with many peoples’ income levels and, therefore, their taxes.

The problem is that, unless you only have one job (and therefore one T4), your income levels could change and your taxes might not match them. This is particularly true for people who are dealing with:

  • Employer change part-way through the year
  • Missing a few weeks or months of work
  • Collecting CERB
  • Collecting EI
  • Significant Overtime
  • Part-time jobs

What Can You Do?

The first thing I want to do is reassure people that we can help you figure that out with our mid-year review package! I know it isn’t mid year, but you still have more than two months left in the calendar year to change your income, more than four months until the RRSP deadline, and more than six months to save money for your tax bill (if you have one)!

Now is a great time for a review, and we had a lot of success last year in doing these for people.

Regardless of whether you come to us or do it yourself, you need to:

  • estimate your total income for the year,
  • estimate your tax payable for the year,
  • determine how much tax you have paid,
  • deduct what you have paid,
  • deduct what you expect to pay on the remaining earnings for the year,
  • and whatever is left is what you will owe.

This sounds relatively straightforward, and for some people it is. But even if it is complicated, it is well worth it! I would much rather know today that I am going to owe $6,000 in taxes than find out in April. At least now you have time to do something about it!

For example, if you are an employee:

  • ask to have more taxes taken at the source,
  • invest in RRSPs,
  • get a part-time job (but watch the taxes),
  • or at least start saving some money.

As an employee, your focus is reducing your tax payable.

For the self-employed:

  • Put more tax dollars aside in your savings account,
  • Invest in RRSPs,
  • Consider making those purchases that you were leaving for the new year,
  • Consider paying your spouse or children for all the work they have done in your business,
  • and consider deferring some of your jobs at the end of the year until January.

Be Proactive

Regardless of your situation, it’s very important to be proactive! The more action you take now to soften the potential blow next April the better thing swill be. Save yourself the stress and the potential major scare! Take action now and book an appointment today to get started with your mid-year review!

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.