Over the last few years, Canwest Accounting has seen a steady increase in the total amount clients owe after completing their tax returns versus refund levels. For example, in 2021, all refunds added up to $900,000 and taxes owing was $1.5 million. A few scenarios have led to this, including an increase in the number of people with a second job or lucrative side hustle. According to Abacus Data market research, 59% of Canadians took on or considered taking on a side hustle last year.
“We are seeing a lot of people who have extra income from a second job or side hustle, like food delivery services, who owe taxes,” said Sharlane Bailey, owner of Canwest Accounting, which has offices in Victoria and Langford.
In these situations, methods for mitigating the pain of owing taxes to avoid facing a tax bill when filing your income tax return, Sharlane suggests the following:
- If you work two jobs, have extra tax taken off, and correctly fill out your TD1 form to account for earnings from both jobs.
- If you have a side hustle, ensure you are collecting all receipts for expenses that apply to the business and keep track of your mileage, if applicable. These can be written off.
- For some, contributing to a registered retirement savings plan (RRSP) can be a good strategy.
- Making donations to registered charities can also help reduce taxes owed.
Once your business taxes total $4,000 or more, the government will require you to pay taxes on your self-employment income according to a quarterly instalment schedule.
The other scenario Canwest Accounting sees is where people have sold a rental property and owe capital gains. This inevitably leads to bumping investors up a tax bracket. To ensure you have enough saved to pay the capital gains tax, Sharlane recommends that these individuals set aside 25% of the total profit from the sale.
To have the exceptional team at Canwest Accounting save you time and money by doing your taxes, bookkeeping, tax planning for your business, or filing estate returns, call or email us.
The suggestions and advice provided by Canwest Accounting should not be relied upon in place of professional advice. You are responsible for checking the accuracy of relevant facts and opinions provided.