If you are planning to file an income tax then this in-depth article is for you. Whenever it is, filing the tax is the most important aspect of everyone’s life because it helps us to avail many benefits that a government is offering. At the same time, it helps the country’s economy to grow and create more opportunities for the country and its population.
Different countries have different tax systems, some may be lower and some countries charge huge amounts in the form of taxes. Now first we will have some introduction about the Canadian tax system and later we will discuss the other important topics related to tax filing in detail.
Introduction to the Canadian tax system:
As everyone says Canada is the best place to experience the quality of life and every year Canada is opening its doors to thousands of immigrants, inviting them to the country because Canada wants to create a better economy by helping immigrants to start multiple businesses and create better employment opportunities for its country’s population.
If you are a Canadian citizen or Canadian immigrant who is working in the country and receiving a salary slip then at any cost you should file an income tax and you don’t have an opportunity of claiming expenses from the government.
But if you’re a business owner or self-employed and you’re making money by yourself then you are lucky. Just stay with us so that you can get good insights about tax filing in detail.
Different types of taxes in Canada
In Canada we can see two types of taxes, they are federal and provincial taxes. Federal tax will be the same for every citizen but provincial tax will be different according to the province.
Understanding progressive tax:
First, let’s see how progressive tax works then we will discuss it in detail.
Let’s assume two tax slabs.
0$ – 48,535$ = 15% tax
48,535$ – 97,069$ = 20% tax
Just think you’re employed and receiving a payslip of 75,000$ then
The first 48,535 is calculated with 15% tax which is 7,280$
The remaining 26,465 is calculated with 20% tax which is 5,293$
The total tax will be 7,280+5,293= 12,573$
If you are earning 75,000$ you are not directly charged 20% tax instead we follow the progressive taxing system and calculate and pay the above-mentioned amount which is 12,573$. If you are directly charged 20% on 75,000$ then you have to pay 15,000$ as tax. So here you’re saving nearly 2,500$ in federal tax because of the progressive tax system.
Let’s assume you are in Mississauga, which is in Ontario. And along with this federal tax, you also need to plan tax preparation in Mississauga which is called provincial tax. This provincial tax will be according to your Ontario provincial tax rate.
The above tax system applies to both employees and businesses but here is a big opportunity for the business owners who are willing to file tax returns for their business. If you’re a normal employee then you’ll get medical insurance benefits, Education for your kids, and other benefits.
Benefits of filing tax returns for business owners.
Better financial ranking:
If you are earning 1,00,000$ from your business and filing taxes faster or in time then financial institutions like banks and loan giving institutions assume you as a person having the best financial record. And they don’t mind giving loans to you at any point in time.
One can avail huge amounts of loans from banks with very little interest compared to others if you are having a better financial record.
Businesses can exempt expenses:
If you are an employee and making 1,00,000 per year, then you should have to pay the government tax at any cost. But in business, it won’t be the same scenario. From that 1,00,000$ you can exclude all the expenses incurred in your business operations and tax is paid on the remaining amount. So that the lesser the taxable amount the lesser tax you pay to the government.
So these are the two major benefits of paying or filing taxes on time. There are many other small benefits too but these are the most important ones which everyone should keep in mind.
Many of them say that the taxes in Canada are too much but tax accountants in Mississauga can help if you carefully plan everything. If you take suggestions from an experienced firm then they can go through your financial data and let you know your tax-saving areas and be overall helpful for you.
Finally, by paying taxes on time we are directly growing our country’s power where we get instant benefits from the government, and at the same time, we are indirectly empowering our future generations with our systematic tax paying. So we highly suggest you file income tax every year.
We hope that we served you better and gave a better insight into tax filing and its benefits for business owners and also for employees.
If you are located in Mississauga and if you are in search of a taxation services Mississauga or tax accountant in Mississauga then you call us over this number +1 647-241-5126