| I am often asked the question "How can I reduce my | | | | owners as well as the timing of these payments. The |
| taxes?" There are many specific and technical things | | | | second client needs to be reminded to supply me with |
| that one can do to reduce their personal income taxes | | | | information and then it is in a format that is difficult to |
| such as retirement savings plans, donations, tax-free | | | | understand and needs to be deciphered. Secondly, it is |
| savings accounts, and the type of investments one | | | | so late and close to the filing deadline that there is no |
| holds. For the business owner, the proper inclusion of | | | | time to run a proper set of scenarios or to adjust the |
| income and expenses is the starting point and then | | | | type and timing of payments to the owners. Doing |
| how that income is reported by the business or the | | | | accounting and taxes in this manner may also mean |
| owners makes a huge difference. But here I want to | | | | that items will get missed, errors happen, or the file |
| get down to the very basics though, and that is the | | | | may be sub optimized in the rush to meet the deadline. |
| organization of your records and the timeliness of | | | | In the situation discussed above, the first client pays |
| when they are ready for your accountant's analysis. | | | | less tax on greater income than the second client |
| This is the foundation to taking advantage of any | | | | does. And basically it comes down to taking care of |
| specific tax reducing strategy. | | | | the details in your business. Time and time I have seen |
| For example, I have two clients who have | | | | that individuals that take care of the details have more |
| incorporated consulting businesses in Canada. The | | | | success in their business. |
| work is the same and the relevant income and | | | | If running the business takes up so much time that |
| expenses although different in amount are similar in | | | | there is no time to properly take care of the details |
| their substance. Both of these clients do their own | | | | then the business owner should consider outsourcing |
| basic record keeping throughout the year. The first | | | | the basic bookkeeping. In the situation above, the |
| client keeps simple but meticulous records on a | | | | amount that the individual would save in tax obligations |
| spreadsheet and has all backup documentation filed | | | | would more than pay for the bookkeeping with the |
| and accessible. This information is provided to me | | | | added benefit of freeing up time for earning income or |
| shortly after the corporation year-end. I am able to | | | | leisure and family activities. |
| work with this client so that he is amazed at the small | | | | Discuss your unique situation with your accountant. |
| amount of tax that he has to pay. I am able to do this | | | | They will be able to affirm what you are doing now or |
| because I have the time to consider various | | | | make suggestions to make both of your lives easier |
| alternatives and can run some scenarios on distribution | | | | and your tax bill lower. |
| of taxable income between the corporation and the | | | | |