[read time: over your morning coffee]
When you’re working a ‘regular’ job, taxes are deducted from each pay cheque – and in a perfect world – they match the taxes that you should expect to owe the government when your return is filed.
Is that logic true???
Well, it depends.
For any individual, there are many aspects of a tax return that must be considered when calculating your taxes each year. Considerations such as: all sources of income, deductions available, RRSP contributions made, transfers between family members, etc. But if you have a good handle on all of those components, then you should be able to estimate the taxes you will owe the CRA quite easily – well before your return is actually prepared and filed.
From our perspective, they absolutely shouldn’t be.
If you’re self-employed and are keeping track of your income and expenses fairly regularly, then you should have a good idea of your tax situation throughout the entire year. Simply by using a basic template that estimates your tax situation – you can stay on top of your tax liabilities each and every month – not to mention at the end of the year.
For our self-employed clients, knowing how much taxes they will owe by April 30th of any given year is critical in managing their cash flow. Therefore, priority #1 for us is to ensure that our clients have some piece of mind each January as to how much taxes they will owe from their business activities. We wouldn’t have it any other way.
There are lots of free templates out there that can definitely help in alleviating much of the tax stress self-employed individuals experience. But if you really want a tool that addresses your specific situation, your bookkeeper or accountant should be more than willing to help.