“I am not afraid of tomorrow, for I have seen yesterday and I love today.” — William Allen White

Fear shows up everywhere in business: in pricing, hiring, marketing, investing, and even in the decision to get started at all. It doesn’t help that the fear of failure is rising globally—almost half of people who see good opportunities to start a business still hold back because they’re afraid it might fail.

Fear itself isn’t the enemy. It’s how we respond to it. Handled well, fear pushes us to prepare, plan, and grow. Handled poorly, it keeps us small, stuck, and eventually out of business.

Looking back on my own journey as a CPA and entrepreneur, these are the five fears that have shown up most often—for me, and for the founders I work with.

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1. Fear of failure: never going all‑in

“Instead of worrying about what people say of you, why not spend time trying to accomplish something they will admire.” — Dale Carnegie

When we launched our accounting firm, one partner was full‑time and two of us held onto our corporate jobs. It felt “safe”: steady salary, reinvested profits, less pressure. It also slowed growth and diluted focus.

Beneath that structure was a simple truth: I was afraid. Afraid of public failure. Afraid of losing a stable income. Afraid that the people who doubted us might be right.

Even after I went full‑time in the business, I kept taking contract roles on the side. I was physically present but mentally hedged. Fear of failure showed up as half‑commitment.

What helped:

• Asking: “In 5–10 years, will I regret not giving this a real shot?”
• Defining the true worst‑case scenario (which was rarely as catastrophic as my imagination suggested).
• Creating a Plan B (backup income strategies, emergency fund) so I could move forward without pretending the risk didn’t exist.

You don’t remove fear of failure by waiting. You reduce it by moving with a plan, learning quickly, and giving yourself a safety net that lets you take meaningful risks.

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2. Fear of committing to expenses: staying too small for too long

“Everything you want is on the other side of fear.” — Jack Canfield

Many founders never hire, never upgrade their tools, and never invest in growth because they’re terrified of “what if the money doesn’t come in.” That fear is understandable—but if you never take any investment risk, your business stays permanently underpowered.

We felt this when we needed to hire and later when we bought an office unit. Our bank said no to more credit, cash flow was tight, and the timing wasn’t perfect. We moved ahead anyway, with eyes open and a clear plan to make those investments pay.

What helped:

• Running numbers conservatively (worst‑case cash flow, not just best‑case).
• Committing to one strategic expense at a time, not ten.
• Treating each investment as a test: “What must happen in the next 6–12 months for this to be a good decision?”

The goal isn’t reckless spending. It’s smart, staged investment instead of letting fear keep you permanently stuck at “too small to succeed.”

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3. Fear of not attracting customers: hiding instead of marketing

“I learned that courage was not the absence of fear, but the triumph over it.” — Nelson Mandela

In a crowded, commoditized industry like accounting, we had all the usual doubts: Why would anyone choose us? Will anyone value what we do? What if nobody shows up?

If we had waited for those fears to disappear, we would never have started.

What changed things was focusing less on “Will they like us?” and more on “Can we consistently deliver what we promise and keep getting better?” As we did, clients came—and they referred others.

What helped:

• Doubling down on real marketing (clear niche, clear message, simple offers), not just hoping for referrals.
• Treating each sales conversation as practice, not a verdict on our worth.
• Measuring effort (calls, emails, posts, follow‑ups) instead of obsessing only over outcomes.

Courage in marketing is not shouting louder; it’s showing up consistently, even when you’re not sure it will work yet.

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4. Fear of not earning enough: quitting too soon

“Do the thing you fear to do and keep on doing it… that is the quickest and surest way ever yet discovered to conquer fear.” — Dale Carnegie

If you expect a fast, linear return on your business investment, you’ll be tempted to quit just before compounding starts to work.

After our first five years, if I had calculated my hourly rate, it would have been humbling. Financially, I might have done better in mutual funds in the short term. But business isn’t a short‑term game.

What helped:

• Adopting a long‑term horizon (thinking in 5–10 year blocks, not 5–10 months).
• Tracking progress in capabilities, systems, and client quality—not just immediate profit.
• Setting clear “review points”: dates where we would evaluate strategy, not abandon the whole business emotionally after a bad quarter.

Fear of “not making enough” often masks impatience. Sustainable businesses are earned over time, not in a single season.

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5. Fear of change: clinging to what used to work

“Don’t fear failure so much that you refuse to try new things. The saddest summary of a life contains three descriptions: could have, might have, and should have.” — Louis E. Boone

Technology, client expectations, and business models are shifting faster than ever. Owners who fear change—new services, new tools, new markets—slowly become less relevant, even if they’re experienced and hard‑working.

As accountants, we can be especially conservative. It’s comfortable to keep doing what we’ve always done, with the tools we’ve always used, for the clients we’ve always served. But comfort is expensive.

What helped:

• Committing each year to at least one meaningful innovation (new service, new tech, new process).
• Testing changes small first (pilot projects, beta offers) instead of betting the whole firm at once.
• Staying close to clients and asking what they actually want now, not five years ago.

Change is not optional. Your choice is whether you harness it early or react to it late.

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The real risk: comfortable inaction

“There are risks and costs to action. But they are far less than the long range risks of comfortable inaction.” — John F. Kennedy

Fear will always be with you in business. The question is whether it becomes your advisor or your jailer.

Handled well, fear pushes you to:

• Build backup plans instead of excuses
• Run numbers instead of guessing
• Seek mentorship instead of struggling alone
• Take calculated risks instead of staying permanently “safe” and stagnant.

Handled poorly, fear keeps you:

• Half‑committed
• Under‑invested
• Invisible to your best clients
• Unprepared for change

You don’t get to choose a life—or a business—without risk. You only choose whether your risks are intentional or accidental.

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Your next step: don’t fight these fears alone

If any of these fears sounded uncomfortably familiar—fear of failure, spending, marketing, not earning enough, or change—you’re not broken. You’re a business owner.

But you don’t have to navigate this alone or wait until fear has already cost you years of growth.

In my upcoming FREE business webinar, I’ll show you:

• How to use your corporation to build wealth
• Practical ways to de‑risk your business and minimize taxes
• Key tax planning considerations for your corporation
• Tax and corporate structure basics so your business supports your wealth, not drains it

If you want this year to be the year you stop running your business from fear and start running it from clarity and intention, this session is for you.

Click here to register now and reserve your spot.
Don’t wait until “someday.” Fear won’t disappear on its own—but it becomes much easier to handle when you have the right tools, numbers, and support behind you.

Every year, thousands of new businesses open their doors full of energy and optimism. Yet only a fraction turn into stable, profitable companies. Most don’t “blow up” overnight—they slowly run out of money, momentum, and motivation.

The difference between those who survive and those who shut down isn’t just a great idea. It’s whether the owner avoids a few predictable mistakes that almost always show up in the early years.

From running my own firm and working with business owners across Canada, here are 5 common mistakes that quietly sabotage new businesses—and what to do instead.

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Mistake 1: Trying to serve everyone instead of owning a niche

When we started our accounting business, we tried to be everything to everyone. No clear niche, no deep understanding of a specific client, no sharp value proposition. It made marketing harder, service delivery clumsy, and pricing weak.

At the heart of every strong business is a specific group of people with a specific problem you solve really well.

If you don’t know:

• Exactly who your ideal client is
• What urgent pain you’re solving
• Why you’re clearly better (or different) than their other options

…it’s almost impossible to stand out, charge well, or scale.

Do this instead:

• Choose a clear niche (e.g., “service‑based solopreneurs,” “medical professionals,” “small contractors,” “new Canadians with rental properties”).
• Talk to them—use short surveys, quick Zoom/phone calls, or DMs—to learn their language, fears, and frustrations.
• Shape your offer, pricing, and messaging around that niche, not “everyone.”

Owning a niche makes your marketing cheaper, your service sharper, and your business much more profitable.

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Mistake 2: Treating your customer list as an afterthought

Most new businesses obsess over “getting more followers” or “more leads” but ignore the most valuable asset they control: a permission‑based list of people who know, like, and trust them.

Wealth in a business is not just in products—it’s in the relationship with your audience.

If you blast your list only when you want to sell, or you rarely contact them at all, you’re leaving revenue and impact on the table.

Do this instead:

• Start building your list from day one (email list, CRM, or both).
• Show up consistently with value—practical tips, stories, checklists, templates—before you ask for a sale.
• Segment where possible (clients vs. prospects, beginners vs. advanced) and speak to real needs, not generic content.

A small, highly engaged list will out‑perform a huge, cold list every time.

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Mistake 3: Ignoring cash flow until it becomes a crisis

Businesses don’t fail because of a lack of “potential.” They fail because they run out of cash.

Many owners look at the sales pipeline and feel optimistic, then are shocked when they can’t make payroll, pay rent, or cover taxes.

Do this instead:

• Build a simple 13‑week cash flow forecast—what’s coming in, what’s going out, and when.
• Separate operating cash from tax money; treat tax funds as non‑negotiable.
• Shorten your cash cycle: collect faster (deposits, progress billing, clearer terms) and pay slower where appropriate (within agreed terms).

Cash flow discipline in the first 1–3 years is often the difference between surviving and shutting down.

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Mistake 4: Letting expenses grow without a clear ceiling

In the early years, it’s tempting to spend like the “future version” of your business—nice office, software subscriptions, courses, equipment—before the revenue actually justifies it.

But fixed costs kill fragile businesses.

Do this instead:

• Set an expense budget before the year begins, not after the money is spent.
• Review your P&L monthly; cancel or downgrade any cost that isn’t clearly tied to sales, delivery, or compliance.
• Start lean: rent, software, and staff should scale with revenue, not with ego.

Your first job is to create a profitable business model, not a glamorous one.

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Mistake 5: Building everything on hustle instead of systems

Many founders run their business on memory, adrenaline, and long hours. It works—until it doesn’t. Quality drops, clients slip through the cracks, and growth stalls because the business depends entirely on the owner.

Systems turn your effort into something that’s repeatable and scalable.

Do this instead:

• Document your core processes: how leads are captured, how proposals go out, how you onboard new clients, how you deliver services, how you collect payments.
• Use simple tools to support this—CRMs, task managers, email templates, checklists, automations.
• Aim for this standard: “If I step away for a week, key activities still happen correctly and on time.”

Systems free you from constant firefighting and give your business real value beyond your personal effort.

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The uncomfortable truth (and the good news)

Starting and running a business is hard. The failure statistics exist for a reason.

But business is much harder if you go in unprepared—no niche, no list strategy, no cash flow plan, no expense discipline, and no systems.

If you intentionally build the right foundation—mindset, basic financial literacy, simple systems, and the support of a good coach or advisor—you dramatically improve your odds of not just surviving, but thriving.

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Your next step: get prepared before you grow

If you’re:

• Thinking about starting a business
• In your first 1–3 years and feeling stretched
• Or already in business but worried you might be “one bad month” away from trouble

…this is the perfect time to get ahead of these mistakes instead of learning them the hard and expensive way.

Don’t wait until the next cash crunch, CRA letter, or slow month forces you into reactive mode—prepare your business to win this year.

Click here to register for the webinar now and reserve your spot.
Don’t wait until the next cash crunch, CRA letter, or slow month forces you into reactive mode—prepare your business to win this year.

P.S. I invite you to join us next week on Thursday, March 5th for a FREE special webinar as we share some important updates on business taxes and how you can use your corporation as a tool for tax planning. We will cover the pros and cons of using a corporate structure, compensation strategies for corporate owners, what’s new for this tax filing season, general tax planning strategies, and many more. To get all the details and register, go here.

Across Canada, many people report “business” income as sole proprietors. Any profit—or loss—flows straight onto their personal tax return.

Used properly, a genuine business loss can reduce other income and lower your overall tax bill. But if you report losses year after year, especially while earning regular T4 employment income, you’re waving a red flag to the Canada Revenue Agency (CRA).

The key question is not “Did I register a business name?”
The real question is: Are you actually running a business in a commercial way, with a genuine intention to make a profit?

Hobby or business? How CRA looks at you

Historically, CRA relied on the “reasonable expectation of profit” (REOP) test to decide whether an activity was truly a business. Courts have since refined this, and CRA now uses a two‑stage approach:​

1. Is the activity a personal endeavour (a hobby) or is it undertaken in pursuit of profit?
2. If there is a personal element, is the activity carried on in a sufficiently commercial manner to be considered a business?

If there is no personal element (for example, multiple rental units with no personal use), CRA generally accepts that the activity is commercial and losses may be allowed. If there is a personal element (for example, something that looks like a hobby you enjoy), CRA looks closely at your behaviour to decide whether you’re truly running a business.

If CRA decides your “business” is really a personal activity, it can deny your losses, reverse prior deductions, and assess additional tax, interest, and possibly penalties.

9 signs your “business” may not pass the test

CRA looks at the overall picture, not just one factor. No single item is decisive, but together they tell a clear story.

Ask yourself:

1. Profit and loss history
   • Have you consistently reported losses over several years with no realistic path to profit?
   • Are losses large relative to the size of your operation?
2. Timeframe to profitability
   • Is your timeline reasonable for your industry?
   • A tree farm, for example, may legitimately take longer to show profit than a consulting business.
3. Level of activity vs. comparable businesses
   • Are you operating at a similar scale and seriousness as others in your field in your area?
   • Or is your activity sporadic and casual?
4. Time and effort invested
   • Do you devote meaningful, regular time to the business—marketing, delivery, operations, admin?
   • Or is it an occasional side project with little structure?
5. Your skills and experience
   • Do you have training, experience, or credentials relevant to the business?
   • Are you investing in learning how to operate profitably?
6. Business plan and documented strategy
   • Do you have a written business plan with revenue targets, budgets, pricing, and a path to profit?
   • Are you revisiting and adjusting that plan over time?
7. Marketing and promotion efforts
   • Do you have a business name, website, social media presence, or ads?
   • Are you actively trying to find and keep paying customers?
8. Nature and reasonableness of expenses
   • Are your expenses clearly tied to earning income and reasonable for your type of business?
   • Or are you pushing personal lifestyle costs through the “business” and calling them deductions?
9. Product or service with real market potential
   • Is there a real market for what you sell at a profitable price point?
   • Are you adjusting your offer or pricing based on actual results?

CRA uses these types of factors to decide whether you are truly pursuing profit in a commercial way or using a “business” label to subsidize personal spending.

Why this matters now

Non‑capital losses from a real business can be powerful: they can usually be carried back three years or forward up to 20 years to reduce taxable income.​

But if CRA later denies that your activity was a business, it can:

• Disallow your losses in the current year
• Reassess prior years where you claimed similar losses
• Charge interest on the additional tax
• Potentially impose penalties

In other words, losses you thought were “saving” you tax can come back years later as a painful bill—plus interest.

How to make your business more defensible

If you’re serious about being in business (and keeping your deductions), you need to operate like it.

Here are practical steps you can take this year:

• Write or update a real business plan
  Include revenue targets, pricing, cost structure, marketing strategy, and a timeline to profitability.
• Separate business and personal finances
  Use a dedicated business bank account and credit card. Keep clean books and records.
• Track your time and activities
  Document hours spent serving clients, marketing, improving your offer, and managing operations.
• Tighten your expense claims
  Only deduct costs that are clearly incurred to earn business income and are reasonable for your type of business.​
• Invest in your business skills
  Take courses, get mentoring, and study how profitable businesses in your industry operate.
• Review your results yearly
  If you’re still losing money after several years, ask honestly:
  • Is this a viable business model?
  • Do I need to change strategy—or accept that this is a hobby, not a business?

A simple self‑check: are you really in business?

Answer these questions honestly:

• If CRA reviewed my last 2–3 years, could I clearly show a commercial intention to profit?
• Can I explain my losses with a credible plan and timeline to become profitable?
• Do my records, marketing efforts, and decisions look like those of a real business owner—or someone funding a hobby and calling it a write‑off?

If you’re not confident about your answers, you’re at risk.

Your next step: don’t wait for CRA to decide for you

This is the perfect time—before you file this year’s return—to make sure your “business” will stand up to CRA scrutiny.

As a Tax Advisor, I help self‑employed Canadians and owner‑managers:

• Assess whether their activity will be viewed as a business or a hobby
• Strengthen their business structure and documentation
• Legitimately claim and protect business losses and deductions
• Build a clear plan to move from ongoing losses to sustainable profit

If you’ve been reporting business losses year after year, or if you’re unsure whether CRA would see your activity as a real business, do not wait for a reassessment letter to find out.

Book a call with me today and let’s review your situation before you file your next return—so you can protect your deductions, avoid surprises, and build a business that actually pays you.

P.S. I invite you to join us next week on Thursday, March 5th for a FREE special webinar as we share some important updates on business taxes and how you can use your corporation as a tool for tax planning. We will cover the pros and cons of using a corporate structure, compensation strategies for corporate owners, what’s new for this tax filing season, general tax planning strategies, and many more. To get all the details and register, go here.

Every year, millions of Canadians file their personal tax returns using DIY software. It’s fast, convenient, and the math is usually correct.

But software is not a tax advisor. It can’t see the full picture of your life, it doesn’t plan ahead, and it definitely doesn’t warn you when a small “harmless” choice today could cost you thousands over the next decade.

With the 2025 tax filing deadline of April 30, 2026 for most individuals (and June 15, 2026 for self‑employed, with payment still due April 30), this is the time to slow down, get intentional, and avoid the mistakes that quietly drain your wealth.

Below are 10 common, expensive mistakes I see Canadians make every year—and what to do instead.

1. Treating “self‑employed” as a free pass to deduct everything

Being self‑employed does not mean you can deduct every expense that feels “work related.” Clothing you wear every day, most meals and entertainment, and home office costs all have specific CRA rules and limits.

If you claim ineligible or excessive expenses, you risk reassessment, interest, and penalties. Instead, learn which expenses are truly deductible for your situation and keep proper documentation.

Action: Before you claim it, ask: “Is this clearly allowed under CRA rules, and do I have receipts to prove it?”

2. Copying what your friends claim

Just because your friend writes off their car or home office does not mean you can. Your facts matter.

For example, vehicle expenses are only deductible when you are required to use your vehicle for work or business, you actually use it to earn income, and you can support this with a logbook and a signed Declaration of Conditions of Employment (T2200) if you are an employee.

Action: Stop copying; start checking. Confirm that your situation actually meets CRA’s conditions before claiming a deduction.

3. Ignoring valuable carryforwards

Every year I see taxpayers leave money on the table because they forget:

• Unused tuition amounts
• Capital and non‑capital losses
• Donation and medical expense carryforwards

These amounts can reduce your tax bill in future years if they’re tracked and applied properly.

Action: Review your prior Notices of Assessment and tax returns for unused credits and losses before you file this year.

4. Not keeping records long enough—or in a usable format

CRA generally requires you to keep tax records for at least six years from the end of the tax year they relate to. If you filed your 2025 return, you must typically keep those records until at least the end of 2031.

Many people can find old receipts in a box, but can’t find PDFs of old returns after changing computers or software.

Action:

• Keep both paper and digital copies of returns and key receipts.
• Back up your files to secure cloud storage.
• Don’t shred anything early—you may need it in an audit or review.

5. Assuming CRA will “fix it” in your favour

If you miss a T4 or T5, CRA will almost always catch it, reassess you, and charge interest (and possibly penalties).

But if you forget to claim property taxes, tuition, disability amounts, medical expenses, or other eligible credits, CRA is under no obligation to add them for you. You simply pay more tax than you should.

Action: Do not rely on CRA to optimize your return. Your job is to make sure income is complete and all deductions and credits you’re entitled to are claimed.

6. Not using a T1 adjustment when you discover a mistake

If you spot an error after filing—missed slip, missed credit, wrong amount—you can usually correct it by filing a T1 Adjustment Request or using the “Change my return” service in CRA My Account.

Too many Canadians notice mistakes and do nothing, leaving hundreds or thousands of dollars unclaimed.

Action: If you discover an error, don’t accept it as “too late.” File an adjustment and recover what’s yours.

7. Owner‑managers treating corporate funds as “personal pockets”

If you own a corporation, taking money out as shareholder loans or “draws” without properly recording it as salary, dividends, or a legitimate loan can trigger additional tax, interest, and penalties.

Improperly tracked shareholder loans can be forced into your income, sometimes in a year that is tax‑inefficient for you.

Action: Work with a professional to plan how you pay yourself (salary vs. dividends vs. bonuses) and track every transfer between you and your corporation.

8. Overlooking legitimate deductions

Commonly missed deductions include:

• Interest on loans used for business or investment
• Investment counselling and management fees (where eligible)
• Certain professional fees and carrying charges
• Income splitting opportunities that follow CRA rules

These can meaningfully lower your taxable income when documented and claimed correctly.

Action: Review your bank and credit card statements for the year and highlight any costs related to earning business or investment income.

9. Missing powerful tax credits

Tax credits reduce tax payable, dollar‑for‑dollar. Missing them is like walking past cash on the sidewalk.

Examples include:

Non‑refundable credits such as:

• Basic Personal Amount
• Charitable donation tax credit
• Spouse or common‑law partner amount
• Disability amount

Refundable credits and benefits such as:

• Canada Workers Benefit (replacing the old Working Income Tax Benefit)
• GST/HST credit and other income‑tested benefits

Action: Use CRA’s tax guide and a checklist (or work with a professional) to ensure you’re capturing both refundable and non‑refundable credits you qualify for.

10. Letting fear of CRA lead to bad outcomes

If you’re anxious dealing with CRA, it’s easy to over‑share, under‑share, or misinterpret what an officer is asking for. That can escalate a simple review into a broader audit.

Calm, clear, complete responses—supported by documentation—keep things focused and manageable.

Action: If you receive a CRA letter and you’re unsure what to do, don’t guess. Get professional help before responding.

The real value of your tax return: insight, not just a refund

Most people think “done” means “filed” and “refund received.” That’s a low bar.

Your tax return is a goldmine of insight—if you know what to look for. At minimum, you should know for 2025:

• How many dollars you actually paid in tax
• Your average tax rate
• Your marginal tax rate
• Why you received a refund—or why you didn’t

More importantly: do you know what to change so that you can earn more and legally pay less tax next year than you did this year?

I regularly see Canadians paying little to no taxes, on incomes from 50,000 to nearly 500,000. The difference is rarely “luck.” It’s planning.

Every unnecessary tax dollar you pay today doesn’t just cost you that dollar—it costs you the growth on that dollar for the rest of your life.

Your next step: don’t just file—optimize

If you:

• Use DIY software
• Have a more complex situation (self‑employed, investments, rental property, corporation, family income splitting, etc.)
• Or simply don’t have clear answers to the questions above

…then this is the year to stop leaving money on the table.

As a CPA and Tax Advisor, I built my practice to help you stay tax-efficient. I can help you:

• Identify missed deductions and credits
• Understand your true tax rates
• Build a practical plan to reduce taxes and improve cash flow, year after year

If you want to file your 2025 tax return with confidence—and a clear strategy to pay less tax going forward—join us on Wednesday, February 25 as we share critical personal tax updates and planning consideration for the 2026 tax filing season. Get all the details here.

As you may already know, tax planning is all about minimizing or eliminating taxes. Effective tax planning requires time to implement. The earlier you start planning, the more tax-efficient you’ll be with your affairs. As we approach the end of the year, there is a limited opportunity to implement some tax planning. A good tax plan will often include strategies to deduct, defer, and divide.

1. Deduct 

In my book, Tax-Efficient Wealth, I discuss the difference between tax credits and tax deductions as most people don’t understand the difference between these two terms. 

A tax deduction (or “write-off”) reduces your taxable income, on which your federal tax is calculated. If you’re paying some taxes, a deduction is worth about 25% to 50% of your taxable income depending on your marginal tax bracket. A few examples of common deductions include:

• RRSP & Pension plan contributions
• Interest expense on money borrowed to earn income
• Union/professional dues
• Alimony/maintenance payments
• Allowable employment expenses
• Moving expenses
• Child care expenses

2. Defer

This is another term that is often misunderstood. As the name suggests, a deferral strategy allows you to move your tax liability into a future year. You owe the tax, but rather than paying it today, you can pay it at a future date. This strategy allows you to take advantage of the time value of money and also gives you some control over the timing of when you pay the taxes.

The most common tax-deferred account in Canada is the Registered Retirement Savings Plan (RRSP). Essentially, with these accounts, taxes on the income are “deferred” to a later date. This account has its benefits as you get the immediate advantage of paying less taxes in the current year. Promoters of this plan often encourage high-income earners to max out their tax-deferred accounts to minimize their current tax burdens with the assumption that when they retire, they will likely generate less taxable income and, therefore, find themselves in a lower tax bracket.

3. Divide

This strategy is more commonly referred to income splitting. This strategy allows you to spread income among different taxpayers to lower the effective tax rates for the combined family. When done correctly with planning, income splitting can result in significant tax savings as we have a marginal tax rate system in Canada.

Some common examples of how this can be accomplished include the following:

• Use of spousal RRSPs to split income in retirement.
• Splitting CPP retirement benefits with your spouse.
• Splitting pension income among retired couples.
• Investing non-registered funds in a family member’s account with a lower tax bracket.
• Payment of reasonable wages to family members (through a business).
• Use of partnerships or corporations to earn business income.

Conclusion

Often, we underestimate the impact of good tax planning. We don’t realize how much money we’re leaving on the table when we pay more than our fair share of taxes. I know tax is a complex topic but I encourage you to learn the basics. This is one reason I wrote the book, Tax-Efficient Wealth and this is why I continue to share valuable insights through this platform. You can get a FREE copy of the book here to start your journey to tax-efficient wealth. 

Remember, every dollar saved in taxes will help accelerate your wealth. You can use those extra dollars to improve your lifestyle, to contribute to your community, and to pass on to the next generation. 

If your goal is to minimize taxes, I can help! Book a call with me here and let’s discuss how I can help you become more tax-efficient.

P.S. I invite you to join us next week on Wednesday, February 25th for a FREE special webinar as we share some important updates on personal taxes ranging from the extended deadlines for charitable donations, reduction of personal tax rates, disability support deductions, alternate minimum taxes, trust filing, carbon rebates, first-time home buyers GST rebate, personal support workers tax credit, other tax credits/deductions, and many more. To get all the details and register, go here.

This is often misunderstood. To be clear, “tax-deferred” does not mean the same thing as “tax-free.” Tax-deferred is something that must eventually have taxes paid on it. On the other hand, tax-free will not need any tax payments made.

Tax-Deferred

Tax-deferred accounts allow you to realize immediate tax deductions up to the full amount of your contribution, but future withdrawals from the account will be taxed at your regular income rate. The most common tax-deferred account in Canada is the Registered Retirement Savings Plan (RRSP). Essentially, with these accounts, taxes on the income are “deferred” to a later date.

This account has its benefits as you get the immediate advantage of paying less taxes in the current year. Promoters of this plan often encourage high income earners to max out their tax-deferred accounts to minimize their current tax burdens with the assumption that when they retire, they will likely generate less taxable income and, therefore, find themselves in a lower tax bracket.

Tax-Free

Tax-free accounts, on the other hand, don’t deliver a tax benefit when you contribute to them. Instead, they provide future tax benefits, i.e. returns on the invested funds grow tax-free and withdrawals at retirement or at a future date are not subject to taxes. In Canada, the most common type of this account is the Tax-Free Savings Account (TFSA).

With these accounts, the benefits are realized further in the future as time is needed to grow the funds in the account and to subsequently grow the returns in a tax-free manner. So, this account is ideal for young adults who have more time to save within this account.

In general, low-income earners are encouraged to focus on funding a tax-free account on the assumption that they are not currently in a high-income tax bracket. Higher-salary earners are encouraged to contribute to a tax-deferred account to get the immediate benefit of lowering their taxable income, which can result in significant value.

While I love both of these plans and use them as tools for wealth accumulation, careful planning is required when investing in these accounts, particularly, in the tax-deferred account. There are a number of factors to consider when using these accounts to ensure you achieve permanent tax savings and not just tax deferral to a future date.

Some of these factors will certainly include how you intend to withdraw funds when you retire, the world economic trends, including rising government debt, government spending and inflation. It is important to consider these factors and intentionally plan how you use these accounts today to maximize permanent tax savings. I go into a little bit of details on the strategies you can use in my book, Tax-Efficient Wealth.

P.S. I invite you to join us next week on Wednesday, February 25th for a FREE special webinar as we share some important updates on personal taxes ranging from the extended deadlines for charitable donations, reduction of personal tax rates, disability support deductions, alternate minimum taxes, trust filing, carbon rebates, first-time home buyers GST rebate, personal support workers tax credit, other tax credits/deductions, and many more. To get all the details and register, go here.

Did you know that the majority of tax laws are written to motivate certain behaviors?

The government will use tax laws to levy more taxes. But it will also use tax laws as tools to shape the economy by promoting social, agricultural, and energy activities.

The government wants the economy to grow. To achieve this goal, the government provides incentives to people to engage in the activities that will drive growth in the economy.

The wealthy understand this. So, they take advantage of these tax laws and engage in the activities that provide tax incentives. And by doing this, they save a lot in taxes.

The poor and the middle class don’t understand this. They don’t see anything good in the tax law. As a result, they miss out on many tax incentives hidden in the tax law.

If you want to save on taxes, you have to model what the wealthy are doing and engage in similar activities.

Why is it important to save on taxes?

If you have a decent income, then taxes are your biggest expense. As a result, taxes will be a major obstacle to building wealth.

The average person in a developed country (Canada included) spends 20 to 35 percent of their life working to pay taxes. In other words, an average person dedicates more than two hours of every workday to feed the government.

If you do the math, this is equivalent to approximately 13 years in your work life and 20 years in your lifetime.

This is a prison sentence!

So, if you don’t pay attention to how much taxes you’re paying, you’re essentially allowing the government to steal your money and your time. The fastest way to put money in your pocket is by reducing your taxes.

To reduce your taxes, you have to model what the wealthy are doing by changing your facts.

Here are 3 easy ways to change your facts and reduce your taxes:

1. Start a business

The majority of the tax law is written to help businesses save on taxes. This is one reason all wealthy people own businesses. They get it.

Owning and operating a business is one of my favorite tools for managing taxes and accelerating wealth.

Not only does a business give you great flexibility for the deduction of expenses, but it also creates a valuable asset that continues to generate cash flow today and in the future.

In addition to this, you enjoy all the other benefits that come with owning a business such as your ability to control your own destiny; the flexibility to choose who to work with; the opportunity to pursue your passion; and the pride in building something of your own.

If you take a look at most economies in the world, Canada included, small businesses account for the majority of the jobs created. In other words, small businesses are the engine of most of these economies.

In Canada and in most of the developed economies, the government recognizes this. As a result, there are associated tax benefits in the Tax Act to encourage new businesses so that these businesses can continue to create jobs for the economy.

Some of these benefits include the preferential tax rates that businesses enjoy. For example, a business in Canada will pay taxes of approximately 12% on income earned. This is much lower than the top marginal tax rate of approximately 54% that an individual pays on income over $220,000.

In addition, owning a business will allow you to convert what would otherwise be an after-tax expense to a tax-deductible expense.

It is also a smart way to split income amongst family members, which effectively reduces or eliminates taxes that would otherwise be paid.

By owning a business, you have the flexibility to deduct many expenses. Expenses such as vehicle expenses, meals and entertainment, travel, and home business expenses that the normal person pays with after-tax dollars can be strategically converted to before-tax expenses.

2. Invest where you travel

If you love to travel, you can arrange your affairs in such a way as to invest in places you love to travel. By doing this, you can strategically convert all or a good portion of your travel cost to a business travel expense.

If you regularly travel with family, your family members can be actively involved in your business. This way, travel costs for all family members can be deducted.

For example, if you live in Toronto and you love to travel to Calgary, you can invest in rental properties in Calgary. By doing this, you can arrange your affairs such that your travel expenses can be deducted for tax purposes.

For the travel to qualify for tax deductions, you will have to comply with the tax rules related to such expenses. For example, the expense must be business-related, it must be necessary and reasonable.

3. Renegotiate the terms of your employment

If you’re employed full-time, you can renegotiate the terms of your work arrangement and lower your taxes by doing so.

You can change from a full-time employee to an independent contractor. As an independent contractor, you can set up a business entity and provide the same services you were providing to your employer.

By doing this, you can lower your taxes. Rather than pay taxes using personal tax rates, you will now pay taxes using business tax rates and save on taxes.

Doing this will require consultation with a tax specialist to ensure that you comply with the tax rules to get the full benefit of working as an independent contractor.

As a full-time employee, another idea is to structure your employment agreement so that you can work from home. This can allow deductions for a number of home-related costs that you’re already paying for anyway.

With this idea, your home office must either be your principal place of work (more than half your working time must be spent there), or it must be a space designated solely for your work and used on a regular and continuous basis for meeting customers or clients.

In Conclusion

“Some taxpayers close their eyes, some stop their ears, some shut their mouths, but all pay through the nose.” — Evan Esar

If you want to save on taxes, your biggest expense item, consider changing your facts.

You can start a business.

Invest in cities you love to visit.

And renegotiate the terms of your employment with your employer.

Remember, money saved in taxes could be put to other uses…

Save it.

Invest it.

Enhance your lifestyle with it.

Give it away.

P.S. I invite you to join us next week on Wednesday, February 25th for a FREE special webinar as we share some important updates on personal taxes ranging from the extended deadlines for charitable donations, reduction of personal tax rates, disability support deductions, alternate minimum taxes, trust filing, carbon rebates, first-time home buyers GST rebate, personal support workers tax credit, other tax credits/deductions, and many more. To get all the details and register, go here.

Taxes are by far the largest cost that most households face, yet most people do nothing to manage their taxes

“The best things in life are free, but sooner or later the government will find a way to tax them.” — Anonymous

Whether you like it or not, taxes affect all of us. The news media is always talking about the top three costs for households:

1. Housing (rent or mortgage)
2. Car (loan payments and interest)
3. Education or Child Care (student loans or child schooling)

The truth is, they are wrong. Taxes are by far the largest cost that most households face, yet most people do nothing to manage their taxes.

Over the years, I have filed thousands of personal tax returns for a broad range of clients. From those earning half a million dollars per year to clients with little or no income.

With our marginal tax rate system in Canada, the more you earn, the more attention you should pay.

To help you plan better, I’ve put together the top 10 reasons why you may be paying too much in taxes.

These top 10 reasons are of course, my opinion. They are based on my experience from what I’ve seen over the years working with different clients.

Review them and consider what changes you can make today to save on taxes.

1. Lack of a periodic tax plan

“If you fail to plan, you are planning to fail.” – Benjamin Franklin

This is a big one. Most people will only discuss taxes once a year during tax filing season.

That’s a bad idea.

Planning is critical for both individuals and businesses to ensure that you’re optimizing your taxes.

Tax laws change from time to time and planning ensures you’re on top of these changes and positioned to take advantage of the changes as they occur.

If you are an individual with assets, you have to plan to ensure assets are transferred to your spouse or kids on a tax-efficient way to avoid significant tax consequences on death.

If you own a business, succession planning is critical as there are significant tax implications if you’re considering selling or transferring ownership of your business.

Overall, significant changes in life and the major transactions we make throughout our life will often have huge tax implications. So, you want to stay ahead of this with proper tax planning.

2. Employment income is your only source of income

“In today’s uncertain economy, the safest solution to be wealthy, be in total control and enjoy freedom for you and your family is to have multiple streams of income.” — Robert G. Allen

If employment income is your only source of income, you have minimal opportunity to manage the taxes you pay.

It’s worse if you’re a high income earner (i.e. you gross over $200,000 per year) as you will be in the high end of the income tax bracket.

The high marginal tax rates on employment income in Canada is one of the major reasons the average middle class person finds it challenging to save or get ahead in this economy.

Another reason is that the average employee pays for expenses using after tax dollars with additional sales tax on these expenses.

So, if you’re employed with high income, you have to be creative and to deliberately plan on how to shift income, income split and convert your employment income to other sources of income that are taxed at far better rates.

Strategies may include starting a side business, investing in real estate, negotiating compensation with your employer and creating opportunities to income split with other family members.

3. You never review your tax returns for opportunities to save on taxes

“I don’t know if I can live on my income or not — the government won’t let me try it.” — Bob Thaves

It is common to file your tax return and never review it for opportunities to save taxes in subsequent years.

How many times have you sat down with your tax advisor to discuss how to improve your tax position?

How many times have you reviewed each line on your tax return to understand the nature of income reported, and the marginal tax rate applicable to the income?

Without adequate review, you miss opportunities to adjust and plan ahead.

Often, tax credits and tax deductions you may be entitled to are not claimed as a result of lack of review.

If you don’t take the time to review, you will miss opportunities, and you will pay more than your fair share of taxes.

4. You don’t take advantage of the tax breaks from TFSA and RRSP Contributions

“There may be liberty and justice for all, but there are tax breaks only for some.” — Martin A. Sullivan

Whether you like it or not, whether you agree or disagree, Tax Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs) provide tax benefits!

For RRSPs, taxes deferred to future years puts cash in your pocket today that can be invested, spent or put to other uses.

There are so many misconceptions out there about RRSPs.

One that I hear from time to time is that the government has control of your money.

This is not true!

You have total control of your RRSP investments if you self direct it or manage it yourself in a brokerage account.

Others simply refuse to contribute to RRSPs because they say you will pay taxes when you withdraw from the RRSP in future years.

Yes, you will. However, will you rather pay the taxes today or in the distant future?

For TFSAs, you contribute with after-tax dollars but the income and growth in the account is tax-free.

You certainly want to maximize your RRSP and TFSA contribution room before investing in non-Registered accounts to save on taxes. However, tax planning considerations should be taken into account when utilizing these tax breaks.

5. You’re either single or you act like you are

“The purpose of a tax cut is to leave more money where it belongs: in the hands of the working men and working women who earned it in the first place.” — Bob Dole

There is absolutely nothing wrong if you’re single.

However, if you’re single, the Canadian tax law is not your best friend.

Our tax system is more favorable to families as there are more opportunities to share credits and income split.

Despite the benefits of filing taxes as a family, I still find married couples acting like they’re single as they file separately. As a result, they miss out on potential benefits and tax savings had they filed together as a family.

Moreover, filing your tax returns separately is more likely to result in errors where different members of the family are claiming the same credit or deductions. Often, this will result in unfavorable tax reassessments.

6. You file your tax returns yourself

“You don’t pay taxes — they take taxes.” — Chris Rock

There is nothing wrong with filing your tax returns yourself with the number of relatively cheap or free tax software programs out there.

If you have a simple tax situation with only employment income and nothing else, you will likely be fine.

On the other hand, if your tax return is a little complicated with family, investment income, business income or rental income, you will certainly need the help of a professional if your tax knowledge is not strong.

Filing your taxes yourself with limited knowledge is certainly a recipe for missing credits and deductions and paying too much in taxes.

7. You don’t have a competent Tax Advisor

“Today, it takes more brains and effort to make out the income-tax form than it does to make the income.” — Alfred E. Neuman

And this is why you need a competent Tax Advisor.

Whether you file your taxes yourself or not, it is important to have a professional Tax Advisor that can give you a competent opinion and advice on your situation.

Professional Tax Advisors are held to a higher standard, belong to a regulated professional body that requires minimum educational qualification and ongoing professional development.

These professionals often undergo periodic review of their practice and are required to hold the public interest in high regard.

Also, even if you have a competent tax advisor you’ve been working with for several years, it is advisable, particularly for complex situations, to seek a second opinion just to get fresh set of eyes looking at your situation.

8. You lack basic knowledge of taxes

“The hardest thing in the world to understand is the income tax.” — Albert Einstein

Fortunately, today there are more opportunities for you to learn about taxes. So it’s no longer the hardest thing in the world to understand.

Ultimately, you are responsible for information reported on your tax return, not the tax accountant or filer!

At the end of the day, you have to sign and authorize the tax accountant to file your tax return. By doing so, you’re telling the Government (Canada Revenue Agency or CRA) that you have reviewed your tax return and you are comfortable that all information reported is accurate.

To do this correctly, you must have some basic knowledge of tax, without which you cannot complete a reasonable review of your tax returns.

Getting basic knowledge of taxes is particularly more important if you’re not engaging a reputable professional to prepare your tax returns.

9. You never negotiate the structure of your compensation

“We don’t need new taxes. We need new taxpayers, people that are gainfully employed, making money and paying into the tax system.” — Marco Rubio

Given that various types of income attract different tax rates and certain employment benefits are tax-free, there are opportunities to negotiate your compensation to minimize your taxes.

If you are a full-time employee, you can take advantage of these opportunities when negotiating with your current or future employer.

If you’re a contractor, you can also negotiate and structure how you want to be paid for maximum tax benefits.

10. You celebrate when you get a huge tax refund

“Next to being shot at and missed, nothing is really quite as satisfying as an income tax refund.” — F.J. Raymond

Many people celebrate getting a large refund, thinking of it as a surprise bonus.

In some cases, they give too much credit to the Tax Accountant for getting them a huge refund (assuming of course there is no tax fraud).

Often times, this credit given to the Tax Accountant is not warranted.

What it really means is that more of your money was collected for income taxes than necessary.

Rather than leaving that money with the government, you will be better off earning interest of 2 % to 3% on that money left in your savings account.

Careful tax planning can help ensure that you send only the amount necessary in advance tax payments. If you can, send less instead.

In Conclusion

“Some taxpayers close their eyes, some stop their ears, some shut their mouths, but all pay through the nose.” — Evan Esar

Don’t just read this and do nothing…you’ll be in the same situation next year!

Consider one tip you can implement now to be in a better tax position next year.

Remember, money saved in taxes could be put to other uses…

Save it.

Invest it.

Enhance your lifestyle with it.

Give it away.

P.S. I invite you to join us next week on Wednesday, February 25th for a FREE special webinar as we share some important updates on personal taxes ranging from the extended deadlines for charitable donations, reduction of personal tax rates, disability support deductions, alternate minimum taxes, trust filing, carbon rebates, first-time home buyers GST rebate, personal support workers tax credit, other tax credits/deductions, and many more. To get all the details and register, go here.