How to plan your personal tax for the next year

Hey, the year-end is fast approaching!

You need to start planning for the coming year now.

Delay might be dangerous. Some unexpected activities may pop up and you may not be able to resist them. So, if you want to take good advantage of your leisure moment, it pays to start learning how you can plan for your personal plan.

If you must get started now, you need to start from somewhere.

Maybe starting from the basics will be better.

So, what’s personal tax planning ?

Simply put, personal tax planning is the process of analyzing your financial plan from a tax perspective. In other words, it is the process of analyzing finances from a tax angle, with an aim to ensure there is maximum tax efficiency.

Please note that personal tax planning entails understanding the timing of income as well as expenditure. Before you can plan your tax payment, you need to define your source of income and expenditure.  Also, you need to be able to streamline your tax payment so you can diminish tax liability and eventually end each year with more funds.

Analyzing your financial plan from a tax perspective can be done on a long-term or short-term basis. When you plan your tax on a shorter-term basis, you’re simply planning how to execute your tax at the end of the income year. However, if you’re planning your tax on a long-term basis, you’re creating a tax plan that can be executed at the beginning of the income year.

Almost all personal tax planning falls on a short-term basis. So, your personal tax will also be based on a short-term basis.

To plan your personal tax, you will need to take the following steps:

  1. Review every element in your financial plan: This is the first step you must take to estimate the tax you will be paying at the end of the year. As you know, tax increases as your earnings increase. So, you need to check your financial plan and watch out for elements that could cause a tax burden to you.A review of your financial plan should entail a detailed view of the financial implication of your goals. Take, for instance, if you’re considering investment diversification, you need to understand the earnings you will be getting from the investment. If you’re aiming to sell a property, you should know the amount of tax payable on such revenue. If you won’t be able to meet up with tax for that year, you should consider postponing the sales of such assets.If you’re still struggling to create a comprehensive financial plan, you can check the guide here.
  2. Always keep complete records of your receipt: As soon as the new year begins, strive to keep every receipt of your purchases It enables you to stay organized anytime there is a need for auditing. Specifically, it’s relevant when you need to evaluate the tax you’re expected to pay for the year. Since the evaluation will assist you to get the financial implications of your purchases,it’s advisable you keep those receipt properly.
  3. Make your losses count: If you experience a capital loss in your business, always ensure it reflects in your report. This will give room for some consideration during tax deductions.
  4. File your personal tax quickly: It’s not enough to know the financial implication of all your earned in a year. If you don’t pay your tax on time, you will be made to pay a penalty. Once you’ve vetted the tax billing given to you and can ascertain its accuracy, strive to pay on time.

Since the tax rate changes nearly every year, tax planning would help you anticipate the tax rate fluctuation and take good advantage of it.

Also, if you can plan your personal tax appropriately, you will be able to easily :

  1. minimize litigation: As you know, there is always friction between tax collection and the taxpayers. Tax collectors are popularly known for extracting the maximum amount of money from individuals’ revenue. They do everything within their reach to ensure taxpayers are charged heavily. They seize every opportunity to exploit the taxpayers. In the end, taxpayers feel cheated and eventually resolved to skip future tax payments.However, if you can plan your tax properly, it will be easier for you to notice out any discrepancy in your tax details. Ultimately, you will easily be able to raise tax disputes with appropriate tax authorities.
  1. reduce tax liabilities: Personal tax planning also works wonders in reducing tax liabilities. It ensures that you arrange your investments according to the benefits stipulated in the Canada Income tax act. By so doing, series of tax liability that can be associated with your investment will get minimized.
  2. ensure economic stability: This is one major reason why you need to plan your tax. Each tax plan shows an individual the amount of money he or she will pay to the government at the end of the year. It means that you won’t be surprised to see the amount you will be paying to the government. As a result of this circumstance, you can easily be motivated to pay your tax to appropriate authorities. This will in return boost the economy of the society.
  3. leverage productivity: Know that tax planning can also help you channel your funds from taxable sources to various income-generating plans. This affords you the opportunity of achieving optimal utilization of funds for productive purposes.

As you can see, tax personally tax planning is highly beneficial. So, you shouldn’t have any excuse for not planning your personal tax.

Perhaps you need further help regarding your personal tax planning, feel free to request for help here.

Call Us At :
226-777-9010
Email Us At :
Contact@practicalplanner.ca
Address
1570 Adelaide Street North, London, Ontario, N5X 2L7

Call Us At :

226-777-9010

Email Us At :

Contact@practicalplanner.ca

Address

1570 Adelaide Street North, London, Ontario, N5X 2L7