Personal tax preparation for business owners, their spouses, and their children can be enhanced by expert tax planning to ensure the family’s business structure is set up to minimize taxes.
Before 2018, the tax laws provided the means for business owners to reduce family taxes by splitting their business income by paying family members salaries or dividends, even if they didn’t work in the business. Recent changes to tax legislation may mean this is no longer possible in many cases. Your accountant should help you determine how to handle this issue going forward so that you are in compliance with the new Tax on Split Income (TOSI) rules.
Gathering information to complete your personal tax return can be a pain but it must be done. You will need to gather all the tax information slips (such as T3s, T4s, T5s, T5008s etc.) for you, your spouse, and your children. You will also need records or receipts to support your personal expenses, deductions, and credits and those tend to change from year to year as governments come and go. For example, since 2016, due to a change in government, Canadian taxpayers have lost the Transit Pass credit, the Child Fitness tax credit, the Child Arts tax credit, Textbook credits, and Dependents tax credits. If your accountant is handling your personal tax returns, you will need to deliver this information in a timely manner to ensure your return is filed on time.
Why Have Your Accountant Handle Your Personal Taxes
For the most part, personal tax preparation is fairly basic as long as you have good books and records and you have properly prepared all the required information. But like anything, it takes time and energy. In addition, the tax rules change form year to year and the average taxpayer may find it difficult to follow all these changes.
At Achen Henderson, we handle the entire backend for our clients’ businesses and we’re often involved in their personal financial planning, so it makes sense that we would complete their personal tax returns; after all, we already have a lot of the background information we need to do so. Furthermore, our Audit Shield program covers not only your corporate tax filings but also your personal tax returns. That means that fees incurred to respond to the CRA or defend a personal tax filing are generally covered. Most importantly, we free up our clients’ time so they can focus on the activities that matter to them.
Another benefit is that we know the CRA’s audit programs. We often have some indication as to which credits and deductions they’ll be reviewing in a particular year, so we can anticipate problem areas to ensure that those things are correct before your personal return is filed. Correct tax filings reduce the risk that the CRA will disagree with items reported on your personal tax return, however it will not reduce the costs associated with responding to CRA inquiries.
At personal tax time, Achen Henderson emails out a simple online checklist for each of our small business owners to complete. This ensures that we don’t miss anything and it greatly simplifies the process of having your personal tax returns prepared. If you subscribe to one of our service packages, the fees for preparing your personal tax returns are likely already included.
List of Information You’ll Need
Here is some of the information you’ll need to provide to have your personal taxes prepared:
- Personal details about you and your spouse, including name, address, birthdate, and social insurance number
- Foreign income verification for foreign property that you own worth $100,000 (CDN$) or more
- Information about changes in your financial situation over the past year, such as declaring bankruptcy, closing a bank or investment account, or refinancing a business
- Information about your dependents, including childcare amounts
- Information about pension income, including Canada Pension Plan and Old Age Security as well as foreign pensions, RRIP and RRSP payments and withdrawals, and payments from a Retirement Compensation Account
- Information about investments, including income you earned from your investments, advisor / management fees you paid, professional fees you paid for tax and accounting advice, and a realized capital gains and loss report
- Whether you sold your principal residence in the past year
- Salaries and dividends paid to you by your business
- Any rental income you earned in the last year
- Details about proprietor / self-employment or partnership income
- Any RRSP contributions you made
- Information about medical expenses for yourself, your spouse, and your children; charitable donations; tuition amounts; political contributions; and student loan interest
Contact us today to learn how we can help you with your personal and corporate tax returns, or check out our accounting and bookeeping service packages. They’ll take much of the burden of running a business and preparing taxes off your shoulders, freeing you up to build their businesses and enjoy your life.