Reflections on Tax Season
Still wondering why you owed so much tax this year? You’re not alone. In fact, many people found themselves owing taxes when they were expecting a refund.
Good news, we can put that uneasy feeling to rest. Let us take a second look and make sure it was done right. We won’t charge a penny and we’re happy to explain the tax balance to you. Just give us a call and have your tax return in front of you so we can discuss it together.
Here are the three most common reasons for a surprise tax bill this year are:
Tough times for landlords as many properties had negative cash flows all year, and then resulted in taxable income at the end of the year! It’s because you’re probably paying a chunk of your mortgage down each year. That mortgage paydown is considered profit. In other words, “taxable income”. $10k a year in mortgage paydown is quite common in Calgary.
Many people don’t realize that most gov’t money is taxable. This includes EI (including mat leave), OAS and CPP. The government often doesn’t withhold enough (or any) tax from those mat leave or EI cheques. But the income is still taxable. If you had any other income during the tax year that you collected EI, you would probably end up owing some tax this year.
Employer Not Withholding Enough Tax
You have the ability to dictate how much tax your employer withholds from your paycheque each month. Some people don’t want the government holding an extra penny of their money all year and prefer to pay every year. Others love their tax refunds and have big plans for it this summer.
Whichever you prefer, you can make it happen. There is a form your payroll department has called a TD1 Form. You can get them to withhold more or less tax off each paycheque. If you’re self-employed, ask us, we can help you out too.
Start now to make next tax season better. From using the latest technology to a streamlined process, we work hard to keep you on track and help you avoid penalties. Here are some quick tips you can follow now:
Pay your instalments. Especially if you have a GST number, have a sole proprietor business or a rental property.
Save your Notice of Assessment - it should have arrived by now. Take note of your RRSP Contribution Limit. If you plan on making an RRSP contributions this year, make sure not to invest more than your Contribution Limit.
Keep your important documents safe. We wrote a whole blog on this, check it out here
Now that tax season is over, we hope you can enjoy the summer, stay organized and make a plan to be on track for next year. The sooner you talk to us, the sooner we can help you start building your business!
True North Accounting
Image from Kelly Sikkema on Unsplash