In my post I Owe $30,000 to the Government which I made a week ago, I stated how I had visited my tax accountant and that we estimated I would owe around $20,000 (plus an up-front fee of half of that to pay for 2007).
Yesterday she had finished preparing my taxes and I went to pick them up. The results were better than expected
It turns out that my final owing figure came to $15,802.32, which is $4,200 less than we had quickly estimated, so I’m happy about that. Since they are so busy right now because of tax season, I’ll be going back in mid-May to see a different accountant at the office. He’s the corporate accountant and owner of the company, and I’ll be seeing him again to revisit the option of incorporating, among a few other things. I’ll keep you updated on that in May.
My tax accountant also gave me back my forms for my GST rebate. I had asked her to look over them and let me know what exactly I need to do. Remember when I bought my condo? Well since it was brand new, I had to pay GST tax on it, which is 6% of the purchase price and came to around $13,000. The Canadian government has a thing where I get a big chunk of that back, the only caveat being that it’s a bit of a pain and hassle having to fill out and send a bunch of forms back. I’ll be doing this soon, and I should be getting around $4,000-$5,000 back. Yay.. money. I need it.
Anyhow, immediately after picking up my tax and GST rebate documents, I went straight to the bank and paid the full $15,802.32 to the Canadian government. It took a little while because the young teller at the bank was confused. “You owe this much? For taxes? Hmmm…” I had to reassure her that is was correct, and that I was glad to pay only $15k instead of $20k!
So, my taxes are done, yay. I don’t have to worry about them again for another year. Here’s hoping I can beat 2006 in terms of revenue, in 2007. To be honest, I think it will be fairly difficult to do, but we’ll see what I can conjure up.
All of this recent tax stuff, though, had made me think about something. If expenditures such as labour are 100% write-off’s, why don’t I just spend all of the money I would have owed to the CRA (IRS in USA), back into my business? For example, say it was December 27th, 2006, and I had estimated that I’d owe $15,000 in taxes. If labour writeoffs are 100% deductible, why don’t I just spend $15,000 on hiring designers and programmers to build me something or enhance my sites before the year ends, and instead of paying the government the money, I pay it to myself?
I asked my tax accountant this question and she shrugged and said I could, but I still don’t believe it. I asked John Chow his thoughts, and he disagreed and stated there were some rules such as it woudln’t bring my taxes down to $0, as not all of my income is tax-deductible. I’m still very confused though. Especially since getting different answers from different people.
Robert Kiyosaki I believe talked about doing something similar in his book Rich Dad, Poor Dad. But instead of spending it, I think he talked about putting money away in temporary investments such as bonds. He wasn’t very specific in his book, as anyone who has read it will know.
But I’ll talk to the corporate accountant about this. He’s the expert in my city for corporate taxes; he has a very good reputation, and he should be able to help me make the most of my money…
We’ll see. Again, I’ll keep you posted in mid-May when I go to see him.
Until then, that’s another tax season done, and it’s back to making more moola!