How You Can Minimize Risk Through Tax Planning
2020 is going to be a very difficult year for taxpayers given the economic uncertainty and the sudden legislative responses from the Canadian government. As far as tax payments are concerned, the Canadian government has already extended the deadline for tax filing requirements in 2020—with more changes probably on the horizon.
When faced with unprecedented circumstances like pandemic it’s essential that everyone plan out their taxes in light of existing information to minimize their tax liabilities. Tax risks represent a major threat to your financial stability and at this moment, specifically, everyoneneeds to minimize leakages from their cashflows like tax penalties or excessive tax payments.
What is Tax Risk and What does it Cost?
The Canadian Revenue Agency isn’t known for its superior service like its US counterpart the IRA. The tax collection agency has received scathing remarks from businesses and auditors for years because it gives people false information or makes them wait too long. In this process, a lot of people and businesses frequently overpay or underpay their taxes much to their financial detriment.
This overpayment or underpayment of taxes is called tax risk—the possible financial losses because you didn’t know the value of your tax liabilities. Usually, this happens because people don’t assess how much tax they’d have to pay and don’t set targets for how much money they want to pay in taxes. Once they’ve made these payments the CRA comes after them with penalties or possible legal threats for underpayment—sometimes they simply refuse to refund the overpaid taxes.
How Does Tax Planning Help?
Tax planning is the exercise of calculating your tax liabilities way before the deadline to file your taxes comes around. It’s a complicated process that takes into account every taxable aspect of your finance to come up with a figure for the tax amount you owe the government. Through this financial analysis, you can plan out your expenses and finances to set a cap for an acceptable amount of tax liability or get a head start on your tax preparation.
The process of planning out your tax is an ongoing task that you periodically undertake to see what your tax projections look like. As you continually tweak your financial strategies to meet your tax obligations, you are less likely to be taken by surprise by changes to tax legislation and won’t ever under or overpay taxes.
Need Tax Advisory Services in Edmonton?
Faber LLP is a leading accounting firm in Edmonton, Alberta. We work with some of the most qualified accountants and business professionals to offer tax consultancy, business audit and accounting services in Edmonton. Call us today for more information.