As 2018 wraps up and we plan to bring out a new calendar, it’s time to make sure that you take the essential steps you need to protect yourself next tax season.
Here are six things to consider to minimize your tax bill next year:
1. If you are self-employed and this has been a particularly good year for you and you anticipate a high profit for 2018, consider what updates in equipment or even office supplies you will need for next year, and buy them now.
By stocking up on the things you know you are going to use anyhow, you can lower your tax liability.
2. Another way to lower your tax bill and do something joyful for others is to give generously during the holiday season to organizations that issue tax receipts.
Making donations totaling more than $200 a year can help worthy causes as well as your tax bill.
3. We normally warn clients who may have accessed Employment Insurance or Maternity or Paternity Leave funds this year to make sure that sufficient tax dollars have been taken off.
Be conscious that unless you specifically asked for more taxes to be taken off, sometimes no taxes were deducted and you get a nasty surprise come the New Year.
People on EI normally get a good refund but that can be taken away when you can least afford it and you are left in a shortfall position if taxes are owing.
4. Review your RRSPs to determine whether you need to contribute more to your retirement plan. If you had a life change or sold some assets this year, think about boosting up your RRSP contributions.
Don’t wait until tax season to look at this and realize you should have known this four months earlier.
5. For businesses and the self-employed start assembling your tax papers now so you won’t find yourself in a panic come next tax season.
Prepare your final statements of income and expenses and file all your relevant receipts.
6. If you have entered the property flipping business, where individuals including real estate agents buy and resell homes in a short period of time for a profit, CRA announced this year that it is taking action to address non-compliance in the real estate sector and to ensure that the principal residence tax exemption is claimed only by those who are eligible for it.
This includes those who buy and sell properties before their official sale or construction, a process called assignment sale but sometimes also referred to as shadow flipping.
You must report the money you make on all real estate transactions, including flips and assignment sales (of both pre-construction and resale homes) to Canada Revenue Agency.
The profits you make from flipping real estate are generally considered to be fully taxable as business income.
Certified professional bookkeeper and certified tax specialist Elena Ivanova is managing director of Piligrim Accounting Inc., a national accounting and tax preparation service based in Richmond Hill, Ont. You can reach her at elena@piligrim-accounting.com.
