How Do I Know If I’m Paying Too Much Tax?

Kelowna AccountantHere is a question I received recently via email. It’s a popular one for every Kelowna accountant so I suspect that many of you will find this helpful in clarifying the process. The timing is excellent, to say the least.

A business owner needs to challenge their advisor to look at their current structures and review it based on tax reasons. Remember that you can’t make all business decisions based on tax alone. In fact, most structures and business decisions are not made because of tax reasons at all.

Quite simply, the easiest way to ensure you aren’t paying too much (or too little) tax is to consult your professional advisor or Kelowna accountant. Make sure that you sit down at least once per year (I recommend more often) with your advisor and determine if you are structured to pay the least amount of taxes.

The Questions You Want To Ask Your Advisor:

  • Am I paying myself properly to pay the least amount of taxes?
  • Am I paying family members appropriately to ensure my taxes are as low as possible, and with the least risk?
  • Is my company’s current structure helping me to reduce the amount of taxes I pay as much as possible considering what I do with any excess cash?

Asking these questions won’t necessarily mean you’ll be able to change anything because business-sense must prevail over tax reasons.

Related: Wages Vs. Dividends Income For Business Owners

Don’t Cook The Books

To pay the least amount of taxes, you would probably be doing something illegal. It’s very important to make sure that you are following the law when you are reviewing structures to spare yourself the inevitable troubles that would arise from an audit.

To truly pay the least amount of taxes, you would have to do cash business and under-the-table deals, aka not pay taxes, effectively breaking the law. If your accountant is advising you to do this, I suggest a change in advisors.  It is NOT a good idea.

You need to ensure that you are structured correctly and legally for taxes and for the function in which your business operates. Don’t ever hesitate to contact your local Kelowna accountant when it comes to taxes, not only will it save you money in the long run, it could spare you from a major tax-induced headache!

If you ever want a second opinion you are welcome to contact me to set up an appointment.

 

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