How I Arrange my Income Taxes
March 8, 2009 Posted by Tyler CruzWell, It’s that stupid time of the year again… the time when we all get to ship off an all-too-large percentage of our income to the government to waste.
Actually, the above is only true for those who are self-employed. If you work for The Man, you typically don’t notice income tax since it’s automatically taken from your paycheck every two weeks.
But for those of you who make your full income off the web like I do, this time of the year really sucks. However, once you start making enough, the government usually wants you to start paying quarterly, in advance. So, I’ve actually already paid my 2008 personal taxes back in 2008 and actually have my first quarterly payment of 2009 due in next week.
In March 2008, one year ago, I founded the corporation Merendi Networks Inc. Therefore, this is the first year that I’ll be reporting my corporate tax income. I didn’t get the bill yet, but I’m told it will cost around $2,000 just to get my basic corporate income tax year-end done. That’s one downside to incorporating, but the 15.5% corporate tax here in BC, Canada definitely makes up for it 🙂
And it’s only getting lower. It will be 13.5% in 2009 and it is set to continue to drop here until 2012 when I believe it will be 11% or 11.5%. For example, if I have $150,000 of taxable income (net) for 2009, I would owe $46,819.76 if it was all personal income. As a corporation, it would only be $20,250. Now, of course it’s not that simple since I have to pay myself in dividends so that I can buy groceries and pay my bills, etc. but you get the idea. Also, it’s worth noting that the integration of corporation tax software into an accountant’s toolkit can be a game-changer. With tools like BTC Software, the ultimate solution for corporation tax management, accountants can navigate the intricate world of corporate taxation with ease. Furthermore, these platforms offer a plethora of features that simplify complex calculations and facilitate seamless reporting. Hence, it’s a must-have for every modern accounting firm.
Since I often get a lot of people asking me how I do my taxes, I thought I’d make a little video showing how I prepare them for my accountant. That’s an important note, because what you see in the video is not what I’m sending to the CRA (Canadian Revenue Agency), but just the files I hand over to my accountant’s firm and have them do for me. If you’re managing crypto assets and need guidance, seeking professional advice on crypto tax in Thailand can help ensure your taxes are handled correctly, avoiding potential pitfalls.
I’m currently around 75% done preparing all my documents, but will need to finish soon as I’m meeting with my accountant on Monday. I was given a new guy when I made the appointment over the phone, so I hope he’s good and understands all this web stuff and isn’t really oldschool or anything 🙂
I’ll let you know how things go and what I end up owing in both personal and corporate income taxes. I should be getting a refund from my personal taxes though, since I already prepaid 2008’s taxes which were based off of 2007’s personal income, and since I incorporated this year, my personal income will have been dramatically less than 2007 which means I overpaid and should get a refund.
Anyhow, I’ll keep you guys posted. Wish me luck! I hate taxes!
41 Responses to “How I Arrange my Income Taxes”
Good luck, you’re definitely saving a lot going the corporation route.
$2k to do your taxes?! That sounds a bit on the high side. Might be time to shop around for a new accountant. Also, IMO Tyler, your disclosing way to much in terms of income, etc. I was uncomfortable just watching that video.
Apparently, $2,000 is pretty standard to get your corporate taxes done…
Also, why would I be disclosing too much in terms of income? I’ve always stated detailed records of what I make, spend, etc. It’s partly why many people read my blog.
It may be standard in CA. The average cost in the US is around $700 for an s-corp.
Of course, I have a different situation set up with my s-corp. I have myself on payroll, I pay myself twice monthly, I handle all of that myself through Bank of America’s BEASTLY Business Suite.
I think the way that you are paying yourself (it looks like basically you paid yourself quarterly, in big chunks) is kind of reckless, for lack of a better term. I would say if it ain’t broke don’t fix it, but it seems every year you are stressing over your taxes.
So…
I’m not paying myself quarterly, I’m paying quarterly income tax instalments to the government. I just pay myself whenever I need cash.
I’m aware of that.
I’m just saying, one could say you almost paid yourself quarterly, based on the fact you only paid yourself 3 times.
I’m big on structure, especially when it comes to my business, though I don’t know how it would hurt anything, except for maybe the book keeping, paying yourself when you need the cash seems a bit erratic.
*Shrug* That’s what my accountant suggested I do. He simply said to pay myself whenever I need it and that he’d take care of how to best arrange it at the year-end (I.e. how how much to pay in dividends, etc.)
I’m not an accountant or pretend to be one so I just listen to the advice of mine and try to follow it as best I can.
Basically you are paying yourself in dividends, just writing yourself a check like that wouldn’t be considered a salary.
Fair enough. Keep doin’ your thing, buddy.
I’m just saying, it would be CRAZY for me to think about people counting my money.
I hope it doesn’t go bad for you. Good Luck Tyler. Greg Ellison
Some interesting stuff in there. I’ve always heard discussion on making yourself into a corporation and it sounds like for you, the benefits could be tremendous. It’s too bad that it becomes so complicated when trying to do the paperwork for it.
I’ve read in places (in the US), that there is talk of getting rid of the income tax and instead, making a higher sales tax. Doing this would help remove the complexity of trying to figure out how much you owe, and the amazing amounts of overhead the government has in trying to figure out how much you should have paid. It probably won’t ever happen but it’s good food for thought.
Good luck getting your forms taken care of, I’ll be starting mine sometime this week.
90s Music – I am a HUGE proponant of what you’re speaking of and often bring it up in conversations when income tax gets brought up.
While there are a few issues with this system (such as how the very poor can afford to live), it’s simplicity makes so much sense. I love how people who spend more have to pay more, and those who save more are rewarded. The government should “penealize” those who are buying elaborate toys and spoiling themselves with a higher tax, not tax people more just because they’re making more money.
Yea, I’ve been trying to figure out how ways that these aspects of the system can be resolved and how the poor can still get by without being completely priced out of the market. I think so long as food goes untaxed, it shouldn’t be too oppressive of a system for them. But I’m with you all the way that a sales tax based system would remove a great deal of the complexity and reward those of us who invest and save our money for our efforts.
Don’t know about the specifics of Canada but I prefer to do all this stuff myself rather than use accountants. A couple of basic books to explain what is and isn’t claimable is all you need. There’s no big secret to it, honest 🙂 If nothing else it allows you to work out your tax liabilities as you go along (I have to pay a full year in advance, grrrr).
I just input everything monthly into QuickBooks and then do a bank rec. Takes 1 hour a month but come tax return time print of a few reports and it’s all done. Plus I’m not paying some junior accountant extortinate fees.
Good luck with the refund.
Awesome video. Thanks for posting. I need to get mine inline also.
The video was a bit shaky. I’m dizzy now 🙁
Dang. You’re making some serious dollars now Tyler. Hope you have continued success through 2009. 🙂
I’ll let you know how things go and what I end up owing in both personal and corporate income taxes.
Yeah that would be great, because I am wondering how much taxes you will have to pay on a personal level, and how that would have compared number’s wise, if you were not incorporated 🙂
So with that line you wrote… that means you are getting Double Taxation? I thought that there was a certain corporation where you didn’t get double taxed?
With an s-corp the income is pass-through, meaning the income passes through to shareholder (in this case, Tyler). Better yet, read this; http://www.stephenlnelson.com/How-S-corps-save-taxes.htm. It cleared everything up for me when I was researching info on incorporating.
Thanks, now i now have a clearer picture of what and S-corp is and the tax structure 🙂
I’m a CCPC (Canadian Controlled Private Corporation), not an S-Corp which is an American thing.
Hey Tyler, great blog you got here.
I wanted to get your opinion on getting incorporated. I hear lots of bloggers suggest affiliates to incorporate, but I was wondering if that makes sense only when you make a certain amount.
I mean, if an affiliate is making under 100k USD a year, you do think it’d make sense to incorporate? What income level do you think would provide the most tax-savings benefit to incorporate?
Thanks, and keep the great posts coming!
It really depends where you live and what your corporate and personal tax structures are at, as well as what you’d take out from the coporation, but generally I believe that roughly $100,000/year is the cutoff point where you’d want to consider incorporating.
It’s best just to ask your accountant, that’s what I do. I’m certainly not an accounting expert.
Taxation differs in different countries greatly both personal and corporate.In some countries the taxes are so high that to corporate is senseless.I like taxes in Canada.Are they universal or only for 1-5 year corporations?
I filed online two weeks ago and got my refund last Friday. Unfortunately, the money I received back will go to pay bills. 🙁
Very nice Tyler 🙂 Preparing your own taxes are difficult and I’m still not there yet 😀
-Mike
goog luck buddy …. this isnt bad though…
not badly
not nearly badly! you are a fine fellow
I always leave that stuff to the Pros. I am too scared of the “Man” coming back down on me!
I hate taxes, money loss ftl 🙁
video blogging ftw
I too hate taxes. Best of luck.
Fair work as from my point of view. Good luck.
[…] that the government wants its cut too. It’s that time of year again, so Tyler is showing us how he arranges his income taxes. He doesn’t do the official stuff himself, relying on a certified professional instead, but […]
Awesome post.
very sweet post mate
Awsome post i hate taxes aswell what a pain they are lol.keep up good work
I wonder what is the best accounting software for affilaite marketing. Looking for myself at this moment. Anyone use anything?
Nice Post.Good luck for refund.Thanks for sharing.