We all have to plan our taxes. It is essential to make a good financial strategy. When you know about all the taxes, you know exactly how much you have to pay and when. This way, you would avoid the penalties and remain compliant with all the rules and regulations.
We have seen that the rules and regulations keep changing for doctors in Canada. That’s why doctors and physicians face a lot of trouble when it comes to paying taxes. Therefore, the best option is to contact an accounting firm that deals with all tax-related matters. They should have a professional CPA and expert accountants who have been helping clients for a very long time to maximize their cash flow and financial position.
Generally, there are two taxes that doctors are required to pay from their earnings, which are the federal and provincial income taxes. And, if you know about those tax deductions, you would be able to save your money.
This article will let you know about the tips and tricks that would help you save your practice’s earnings.
Let’s get started!
Know about the tax return to file
A large number of doctors either work as an incorporated corporation or as a sole proprietor. When a person is a sole proprietor, they would have to report the expenses included in their personal income tax return. They are wholly responsible for all the liabilities which come under them or their partners. Doctors would have to file the T1 personal income tax and benefit return when they are treated as sole proprietors.
On the other hand, the incorporated medicine professional would have to file two different returns—the T1 personal income tax benefit return and the T2 corporation income tax return. Your corporation is taxed at the corporate level when you deduct your salary and other allowable expenses from any professional fees it earns. Afterwards, your business may distribute taxable dividends to you or keep the revenue within the organization.
Know what taxable and non-taxable income is for doctors
Most of the income is taxable, which the doctor earns except few of them, and these are:
- Money earned inside a tax-free savings account.
- Gain on the sale of a principal residence.
- Proceeds from life insurance.
These are a few tips to help you with effective tax planning if you are a doctor. When you plan to pay your taxes, you have to make sure that you maximize the deductions and keep most of your income with you. You’d be required to file certain forms when it’s time for the payment of the tax. It might be a daunting task for you. It would be better to be linked with a financial advisory firm that can guide you through the process and make things easier for you. They will do all the work of taxes and guide you along the way on how you can save money that you earn from medical practice in Canada.
Do not hesitate to contact us if you have any further questions.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.