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DennisCPA

Tax Saving Strategies: Did You Know.....?

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I don't think you will get much participation in this thread with that topic.

 

Off the top of my head I can think of 10 far more relevant tax issues that the members here could benefit from.

 

1- Basics of taxes- how much to put aside from each paycheck, how instalments work and how they're calculated (oh, and that the deadline for paying your taxes is different than the deadline for filing your taxes)

2- CPP: what it is and why we pay double

3- What is a tax credit and what is a tax deduction and how to calculate the impact of each

4- What is an RRSP

5- What is a TFSA

6- What exactly is incorporation and what factors make it more beneficial OR what factors make it not beneficial to the individual

7- Tax implications of government loans vs private loans, which to pay off first

8- Balancing paying off debt vs savings vs home buying...how to allocate your income, and how on earth it all has tax implications

9- Tax implications of borrowing to invest (ex:smith maneuver)

10- the 8 billion other important tax issues related to actually owning a clinic that I don't care about since I don't own one

 

There's a definite need for tax information among the population here, but many don't even know what questions to ask, and those of us who do already have accountants.

 

Take some time to get to know your audience because it's clear from previous threads that they are actually interested in knowing more and many have no idea where to start.

Thank you for your input, I will definitely address the issues you have brought up and hopefully others will be able to benefit from this thread 

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Did you know during your first year of associateship, it is unlikely you will owe any taxes?

 
Due to the large amount of tuition credits you have earned throughout your years of school,  these may cover the amount of taxes due in your first year.
So instead of putting money aside for taxes, focus on paying down your student debt or investing your excess cash in your first year.
 
By year two you may still have tuition credits remaining to cover some of the taxes due for the year. Based on the remaining credit, your accountant will be able to tell you if you will need to put money away for your taxes. 
 
Regarding instalments, if you owe more than $3,000 in taxes for a given year, you will be required to make quarterly instalment payments to CRA the following year. These quarterly instalment amounts are based on your prior years taxes owed. (i.e. If you owed $4,000 in 2016, your quarterly instalment payment will be $1,000 for 2017). Each instalment will be due by the end of March, June, September, and December.

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Oh god.. Can someone volunteer to answer all of Malkynn's questions please? I tried watching youtube videos on all of these topics, but the videos never seem to explain them well :/

 

That is a lot of questions :) Best of all there is a potential accountant to correct any mistakes - awesome!

 

2) cpp is the Canadian pension plan - above a minimum amount of income from employment a portion of your paycheck as an employee up is required to be given to the federal government which will then be used to give you a government pension at your retirement. The total amount you have to pay per year depends on your total salary - the more you make the more you have to pay UP TO a fixed amount - this year that is about 51K. The amount you get at retirement depends on how much you contributed (some years you may pay into CPP nothing for instance as you are not employed).

 

For most people who are employees their employer must match as well the amount you are paying. This was a way the government came up with to increase the amount going into the fund and improve the pension.  However since both dentists and doctors are actually self employed we are BOTH employer and employee effectively and thus have to pay both amounts. That is why we pay double - ha, we don't have an employer waiting in the background to pay the other half.

 

It is interesting times right now with the CPP as the government shortly will be increasing the maximum fixed amount quite a bit to over 70K. This means that we will all be both paying more CPP contributions and getting a larger pension in the end.

 

Note is possible as a doctor/dentist to not actually have employment income but rather pay yourself in dividends. Deciding on how much you get as an employee and how much in salary is one of the things people use accountants for actually, and why having a good one is important in our world.

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I'm pretty confused by this.

I know my tax credit covered my taxes for my first "year" 2013, which was only a few months, but I certainly owed plenty of tax for my first full year of work, 2014.

You likely set your year end as December 31st, which meant that, when you filed your 2014 tax return, you had to claim your income from when you started working as a dentist (June??) to December 31st.

If you had set your year end as January 31st, you wold have had no dental income for 2013 because you didn't start working until around June.

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You likely set your year end as December 31st, which meant that, when you filed your 2014 tax return, you had to claim your income from when you started working as a dentist (June??) to December 31st.

If you had set your year end as January 31st, you wold have had no dental income for 2013 because you didn't start working until around June.

Only a corporation can choose a non-calendar year end. If you file your taxes as a self employed individual (proprietor), your taxation year will be the calendar year.

 

When you incorporate and choose a non-calendar fiscal year, the results of the first fiscal year of the corporation are "deferred" into the following calendar year. You accomplish this deferral at the time you switch from proprietorship to corporation. It doesn't have to be right when you start practicing: you can start as a proprietor and decide to incorporate some time in the future.

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