Hi. For Canadian taxes, I have a sole proprietorship. I want to NOT use all of my business deductions, so as to have a higher net. Doing so will help me get a higher refund. Is this legal? Do I have to use every available deduction?
Canada Do I have to use all Tax deductions
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You can do this legally. business deductions and tax credits are there to reduce your income. However, the higher the income you have the higher the tax you will end up paying. So, yes you don't have to take all of your business deductions but by doing this you forfeit to use it. However, the purpose of taking business deductions is to reduce your income to 0. However, using the business deductions would reduce your taxable income would would reduce your tax bill or generate a refund. So, if you don't use it you can still use tax credits but if you decide to not use any of them then there's no way you will get a refund. I assume that you have made taxable income. So, the whole point of doing your taxes is to use both deductions and credits to reduce your tax bill as close to 0 or to generate a refund.
To expand on the situation:
* My business makes less than $10k gross / year. * My Personal tax deductions bring my taxable income down * I have the Disability Tax Credit * I claim the Canada Working Benefit (CWB) * I need enough net income to make a CPP contribution. For all these reasons, if my deductions are high enough I get a much higher CWB. If my net is high enough I get a CPP contribution. So, keeping some deductions out of the equation has increased my refund. I just need reassurance that keeping our these deductions is legal. I'm ok with foregoing them.
* My business makes less than $10k gross / year. * My Personal tax deductions bring my taxable income down * I have the Disability Tax Credit * I claim the Canada Working Benefit (CWB) * I need enough net income to make a CPP contribution. For all these reasons, if my deductions are high enough I get a much higher CWB. If my net is high enough I get a CPP contribution. So, keeping some deductions out of the equation has increased my refund. I just need reassurance that keeping our these deductions is legal. I'm ok with foregoing them.
Interesting - U S law says this -
A self-employed individual is required to report all income and deduct all expenses. Revenue Ruling 56-407, 1956-2 C.B. 564, deals with the issue of taxpayers not taking all allowable deductions in computing net earnings from self-employment for self-employment tax purposes. Rev. Rul. 56-407 held that under §1402(a), every taxpayer (with the exception of certain farm operators) must claim all allowable deductions in computing net earnings from self-employment for self-employment tax purposes.
Net earnings from self-employment are included in earned income for EITC purposes. It is defined by cross-reference to the definition of net-earnings from self-employment under I.R.C. §1402(a). This ruling applies equally to the EITC. CCA 200022051 also provides insight regarding deduction of Schedule C expenses.
A self-employed individual is required to report all income and deduct all expenses. Revenue Ruling 56-407, 1956-2 C.B. 564, deals with the issue of taxpayers not taking all allowable deductions in computing net earnings from self-employment for self-employment tax purposes. Rev. Rul. 56-407 held that under §1402(a), every taxpayer (with the exception of certain farm operators) must claim all allowable deductions in computing net earnings from self-employment for self-employment tax purposes.
Net earnings from self-employment are included in earned income for EITC purposes. It is defined by cross-reference to the definition of net-earnings from self-employment under I.R.C. §1402(a). This ruling applies equally to the EITC. CCA 200022051 also provides insight regarding deduction of Schedule C expenses.
DrStrangeLove
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OP, have you asked the Canada Revenue Agency or a lawyer in your area about your question? From what you wrote, you're asking for legal/regulatory advice, and you're clearly intending on relying on that advice in filing your taxes. I ask this because no one here wants to tell you something that you rely on only to have it turn out to be wrong/mistaken and leave you on the hook for penalties or fines.
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If that's the case then you cannot do so if you want to claim those credits. That's if it's similar to U.S.
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That's if you're claiming such tax credits.
The logic here is tax credits is where the government is handing you money for a certain situation.
If you're taking such a credit you're claiming you're poor or have a economic disadvantage. It is deceptive to not take all deductions.
Because it's like you're claiming you're at an economic disadvantage but the credit is there to fill in that gap.
I am still correct. The original question as a sole business owner do you have to take all tax deductions. You legally don't have too but if you're claiming tax credits each credit you have to know it's conditions. The one you're talking about you will have to use all deduction. You can ask an accountant in Canada and or a lawyer to make sure since no one here is giving you legal advice nor tax advice.
The rules in the U.S.A is similar to Canada.