How Much Tax Should I be Saving?

How Much Tax Should I be Saving?

Take 25% of every dollar and put it into a separate savings account for your taxes.

It’s good advice right?

But how do you know whether 25% is enough (or way too much)?

Honestly, it’s a tricky thing to figure out especially when you have no real idea of what your income is going to be in the coming year.

I don’t know how much you should be saving… but here are few ways to think about it:

1. Use last year as a guide

A good place to start is with what you already know. Look at your tax return and find the number that shows you what your gross business earnings were last year. Be careful not to pick the ‘net income’ number or even the ‘taxable income’ number. Those are your business earnings after a bunch of deductions are taken off.

Instead, find the gross business earnings which is the total amount of money you made last year.

Now, find the amount of tax you owed.

Divide the amount of tax you owed by the gross business earnings and you’ll get a good working percentage.

The question then becomes: is it reasonable to think that this year will be like last year?

2. Harness the power of your fear to oversave for your taxes

I’m a big fan of fear savings. I use my terror of the Canada Revenue Agency to pick a percent that I know will be more than I need. The nice thing about that is that at tax time I get to give myself a refund. Yay!

It’s a great thing to do IF you can afford it, but of course for lots of you … that’s not possible.

3. Think through your upcoming year and play around with a tax calculator

If past numbers aren’t a good guide for you, sit down and think through your income goals for the year (or map out your income with THIS TOOL). If you don’t have any income goals… now’s a great time to play around with them.

This doesn’t have to look fancy. Just open up a TAX CALCULATOR and punch in numbers to see what kind of tax you might owe. It’s a good way to get a rough idea of what a good percentage is for you.

4. Set Milestones and times of year to check in

 The truth for lots of us is that the year is a giant question mark. We could scrape by with the bare minimum or get a windfall of work and make more than we ever have before.

The best method to manage that kind of variability is to make a plan… and then check in periodicially to see if you’re still on track.

Let’s say in January you decide that 20% is more than enough to cover your taxes for the year. Mark your calendar in April, July and October to check in and make sure that this still work. Track your income and use that TAX CALC again to see if you’re still putting away enough.

Remember this finance stuff isn’t a ‘one size fits all’ situation.

Your life is variable, and so your finances are going to have to stay flexible to keep up. The game changer is staying ahead of those changes instead of looking in the rear view mirror and knowing exactly what you ’should have done’.

The important thing is that we practice our technique. That we practise setting aside some amount and check in often to make sure that we’re on track. 

You’ve got this!!

 

Chris Enns

Chris Enns

Financial Planner/Opera Singer

Money never came naturally to me. In fact... I was a bit of a disaster. I remember (very clearly) what it feels like to be 'financially out of control'.

And honestly, I still get stressed about money... that doesn't stop... the difference is that now I have the tools to deal with that stress.

And those tools are what's made it possible for me to build a life full of the things I want: art, creativity, travel, family and more.

If you want to start getting control of your money I'd love to help. You can start with THIS QUIZ, visiting my GETTING STARTED PAGE or by checking out my SERVICES page.

I Don’t Want to do my Taxes Either

I Don’t Want to do my Taxes Either

UGHHHHHHHHHHHHH.

That’s how I feel about doing my own taxes.

Now you might think… Chris… you must love doing taxes, don’t you like money? Don’t you write about taxes and stuff all the time?

Sure. But they’re not MY taxes, and somehow that makes all the difference.

Like so many of you, it usually takes the emergence of something else that I really don’t want to do before I finally haul out the receipts and fill out the spreadsheet that my accountant needs.

Usually the motivation for taxes is more ‘stick’ than ‘carrot’ so this week I wanted to highlight a few good things that come from doing your taxes.

3 Really Good Things You Could Get by FIling Your Taxes:

1. If you’re a parent you gain access to the Canada Child Benefit. If your child is under 6 that could mean more than $6,000 of tax-free money… but you don’t get it if you don’t file your taxes. If you haven’t filed for a few years you could even get some of that sweet cash for past years too, You can learn more here. 

2. You get RRSP room. If you don’t know what an RRSP is or how it works you can read more about it here. For those of you who understand the general concept remember that the way you earn contribution room is based on your income… and they know what your income is from your tax returns.

3. If you didn’t make much this year and you’re thinking… why do I need to do this anyway… the answer is the GST/HST credit. Low income earners will get access to this benefit (and possibly other benefits as well) You can learn more here.

I Know it’s Not Fun… But Avoidance is Expensive

It’s a stupid system. It doesn’t need to be this complicated.

But for now, it is. And for now… you’ve got to do it.

And I promise you from the bottom of my experience, it’s generally not going to be better to wait. It gets more expensive and more stressful.

And if it helps, keep in mind the good things that can come from getting through all that filing and number entering. I’ve only mentioned a few, there are more programs, credits and perks that come from getting it done. 

Power through and make yourself a tasty snack! You got this. 

 

Chris Enns

Chris Enns

Financial Planner/Opera Singer

Money never came naturally to me. In fact... I was a bit of a disaster. I remember (very clearly) what it feels like to be 'financially out of control'.

And honestly, I still get stressed about money... that doesn't stop... the difference is that now I have the tools to deal with that stress.

And those tools are what's made it possible for me to build a life full of the things I want: art, creativity, travel, family and more.

If you want to start getting control of your money I'd love to help. You can start with THIS QUIZ, visiting my GETTING STARTED PAGE or by checking out my SERVICES page.

How Does Canada Tax You When You Earn in Other Countries

How Does Canada Tax You When You Earn in Other Countries

This is a classic opera singer/digital nomad type question, and like every tax question… it can get super complicated.

Tax stuff is tricky when you’re dealing with one country, let alone two or three or all of them.

The best advice I could possibly give is to find an accountant that you trust to help you navigate the nitty gritties of filing your taxes. Everyone is different, and so one-on-one advice from someone who knows your numbers is the best thing.

But I wanted to give you a few bullet points that I hope will help.

 

How your taxes work ties in to where you claim ‘residency’

Residency is a squishy word. You’d think it would be cut and dry – it’s where you live right?
Well, any of you people who live out of a suitcase, or haven’t had a fixed address in years know that it’s rarely that simple.

The government defines residency as a place where you have ‘significant ties’. Those ties can be things like a house, or family, or where your storage locker is.

Some countries (like the US) have specific formulas based on how many days you spend there to determine if you’re a resident, but you can even challenge that… if you think all the evidence points in another direction.

If you claim residency in Canada, but are working around the world… here’s what happens next:

 

Canada taxes you on your ‘worldwide income’ not just what you make in Canada…

So, if you’re Canadian and you’re working in the US or the Netherlands, Canada wants to tax you for all the income you make.

Let’s say you make $10,000 in the US, $20,000 in Canada and $15,000 in the Netherlands, you’ll be taxed on the whole $45,0000.

But here’s the thing that so many of you world travellers know: the country that you’re in often takes a huge amount of withholding tax off of the top of your cheque.

So if you’ve already paid tax in the country you’re in, what happens if Canada taxes it AGAIN?

 

Canada will give you a tax credit for all the tax you’ve already paid in another country

In an effort to make the worldwide tax system possible for mere mortals to exist in, Canada has set up tax treaties with lots of other countries.

Most of that doesn’t matter to you, but in this case it really does.

Those relationships allow Canada to give you a tax credit for any tax you’ve already paid to another country (think all that withholding tax you already gave).

That means that generally you won’t get double taxed on the same income.

Consider this: You’ve been working on a musical in the US, and every time you get paid your weekly cheque the US government takes a huge chunk of that in withholding taxes (which they will).

When you come back to Canada and file your taxes, there will be a place to tally up the amount of taxes you’ve already paid to the US government.

That amount, will be credited against the rest of the taxes you owe, if you paid more than you owe… you’ll get a refund. A refund from the Canadian Government, even though you paid in the States.

 

 

I’ll say again that these are pretty general statements to give you an overview of how the system works. Every country is different depending on the tax treaty, and there are lots of exceptions to even the most basic rules because … it’s taxes.

I hope this will be a tiny bit helpful. If you want to chat any of this out, feel free to send me an email (chrisenns@ragstoreasonable.com), or if you’ve got really technical questions find your way to an accountant that specializes in these kind of taxes.

Chris Enns

Chris Enns

Financial Planner/Opera Singer

Money never came naturally to me. In fact... I was a bit of a disaster. I remember (very clearly) what it feels like to be 'financially out of control'.

And honestly, I still get stressed about money... that doesn't stop... the difference is that now I have the tools to deal with that stress.

And those tools are what's made it possible for me to build a life full of the things I want: art, creativity, travel, family and more.

If you want to start getting control of your money I'd love to help. You can start with THIS QUIZ, visiting my GETTING STARTED PAGE or by checking out my SERVICES page.

6 reasons you still haven’t done your taxes

6 reasons you still haven’t done your taxes

Reasons you haven't done taxes - From Rags to Reasonable

I have been reading a really great book called “The Productivity Project”.. in an effort to be less of an organizational disaster.

It may not be ‘working’ yet… but I’m still really digging it, and I stumbled across something that I just had to share with you… especially those of you who haven’t managed to start their taxes yet… #nojudgement

It has to do with ‘procrastination’ … something that I’m really really good at. The author Chris Bailey (henceforth known as ‘other Chris’) talks about the 6 triggers of Procrastination.

In his research he stumbled across a study that stated that you’re more likely to procrastinate if the task at hand is one or more of these things: (more…)

Freelancer Taxes: How to make your travel tax deductible

Freelancer Taxes: How to make your travel tax deductible

Travel Deduction - From Rags to Reasonable

*I am not a tax professional. This is meant to be an educational tool and NOT a recommendation. Each personal situation is different and there’s a lot of grey area in self-employed deductions. If you have questions (even just little ones) … talk to a tax expert.*


Travel is the one of the best parts of being an opera singer.

Sure, there are the weeks when it’s really not that fun… the non-descript hotel rooms, the 12th meal in a row at Applebees… but at the end of the day, I really like it.

And the only thing that makes it better is that all of that travel is tax-deductible!

Or is it? (more…)

Freelancer Taxes: What counts as ‘professional development’ for artists?

Freelancer Taxes: What counts as ‘professional development’ for artists?

Professional Development - From Rags to Reasonable

*I am not a tax professional. This is meant to be an educational tool and NOT a recommendation. Each personal situation is different and there’s a lot of grey area in self-employed deductions. If you have questions (even just little ones) … talk to a tax expert.*


One of the coolest things about life as an artist is that you’re forced to always be learning.

Something you won’t hear very often…

“Today I learned all the Art… I guess that’s done with…”

Actors, dancers, musicians… are constantly studying not matter what level they’re at. Working with teachers, private coachings, doing classes and looking for anything to help them grow as an artist.

What a beautiful thing.

But how do we translate that really nice thought into black and white numbers at tax time?

How to find your ‘professional development deduction’ when everything you do seems like professional development…. (more…)

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