The post Working More Than One Job? You Probably Owe Income Taxes. first appeared on The Entrepreneurial CPA.
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Working More Than One Job? You Probably Owe Income Taxes.
John Smyk, CPA, MBA
Entrepreneurial Contributor
It comes with a dose of reality that many Canadian households are under tremendous economic pressure. The past few years has seen a spike with price inflation causing the cumulative cost of living to skyrocket. As a result, it has created elevated high anxiety for those Canadian households to take action to maintain, let alone, eroding their standard of living. Lets see how numerous jobs, greater taxes creates a potential problem for taxpayers.
The course of action to counter the financial pressures of making ends meet has been to work two or more jobs. When thinking about the average household budget for just the basics, is overwhelming how Canadians are coping. Food, rent or mortgage payments, utilities, clothing, transportation, and healthcare costs are giving many the headaches to determine their priority spending. Having more than one job has become a necessity to elevate these higher costs. However, is it this simple?
The Unexpected Tax Consequences
Unfortunately for many taxpayers, they may be under the false pretenses that their employers are taking the necessary payroll income taxes to determine their net pay. The surprise will come on April 30th, when their CRA T1 Federal General Form return is due and filed. As each Canadian Province and Territory has differing personal income tax legislation, these taxes will vary for additional income taxes. Most likely, two scenarios are more likely to occur, a much lower income tax refund than expected or a deficiency of income taxes due to be paid.
In isolation, each employer is deducting the required withholding taxes based on your completion of CRA TD-1. However, it is your responsibility to properly complete this form to ensure the appropriate income tax is being deducted.
Other Tax Considerations
Below is a simplified example of how having multiple jobs increases your personal Federal Income Taxes. As the CRA Federal personal income tax rates are progressive, you’ll want to ensure that you understand all your available deductions and in addition any tax deferral vehicles available.
In Exhibit 1, starting with Job 1, you’ll notice how the base personal income tax is calculated. When adding job 2, the average Federal Tax Rate increases incrementally higher. Then, job 3, continues to increase the average Federal Tax Rate. Remember to keep in mind that multiple jobs increases your personal income tax payable.
This illustration provides a calculation of a taxpayer’s employment income tax payable. The Federal Tax Brackets demonstrates the computation over the progressive tax rates. The difference is due to rounding.
Taxpayers Plan Your Household Finance Strategy
To plan your household budget is almost next to impossible in a volatile economy of rising prices. Although, it generally means that creative priority spending becomes as much an art as a science. Take measures to spend and save your money wisely. Any extra money should be placed into a contingency fund, in the event of unexpected household expenses. Another strategy is to shore up any tax deferral plans, such as a Registered Retirement Savings Plan (RRSP), First Time Homebuyers Plan (FTHP) to reduce your taxable income with some excess cash.
If you have any doubts with your ability to make the decisions necessary to direct your financing goals, always speak to a finance professional. It never hurts to get a professional assessment of your household finance strategy or even attain one. Basic finance literacy is still debatable after the credit crises of the late 2000’s. Therefore, placing your personal finance goals at the highest priority will guide you to make the best decisions to avoid unexpected income tax consequences.
John Smyk is Founder of The Entrepreneurial CPA helping entrepreneurs, solopreneurs, small-large business. Contact us for a free consultation Let’s Go To Grow!
The post Working More Than One Job? You Probably Owe Income Taxes. first appeared on The Entrepreneurial CPA.
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The Young Entrepreneurial Movement
John Smyk, CPA, MBA
Entrepreneurial Contributor
Why the young entrepreneurial movement must occur. The rational is simply put that our youth unemployment will grow for years to come. An uneasy feeling for me, as I look back to when I had graduated college. What happened? Since, the 1980’s we’ve experienced the multitude of mergers and acquisition that has reduced the potential career opportunities for many young people leaving school into large corporations today. The depth of offshoring many jobs to other parts of the world is making it almost impossible to compete for what jobs are available.
One way to combat these departures of employment opportunities has been the creation of a parallel economy. What is the parallel economy you may be asking? Well, the parallel economy has created a more cohesive community of companies serving the best interest of objective business models to consumers. The freshness of this approach has led to numerous new innovations through technologies, while, building the local economies by creating both jobs and wealth.
A New Entrepreneurial Frontier
As a result, these significant challenges facing many young people is giving an avenue for them to enter that will give them hope. This opportunity will take young entrepreneurs into the world of entrepreneurship to build their future by competing in the new digital economy. Young entrepreneurs have the distinctive advantage of growing up with the benefits of technology giving them many more options for work anywhere in the world.
Building one’s legacy comes with many sacrifices, especially when your mind is set to take charge with your career. Time, effort, sweat equity and all the qualities that derive character can very well line up with success. The new entrepreneurial frontier will create a pool of leading-edge innovation to inspire more entry level entrepreneurs to participate. Anyone can be an entrepreneur, if they’re focused in continually learning to refine their mission.
Why Become A Young Entrepreneur?
The benefits will always outweigh the negatives in any which way you can assess this. Our younger generations have a much different prospective than ever before to not follow the traditional norms in business. For example, here are some attributes listed to inspire into entrepreneurship,
- much greater independence to work freely in attaining their goals
- not as fearful with mobility to work anywhere their mission takes them
- the most technologically knowledgeable generations to unlock the tools available in the market
- more apt to build a digital e-commerce website than a traditional brick and mortar format
- ability to build a diverse marketing identity to promote their work
- a work/life balance is much more desirable and achievable
- potentially greater job security
- tend to be more socially conscience to the community
Becoming a young entrepreneur allows for defining every aspect of your life that may go unfulfilled in the pursuit of a traditional employment career. Always consider that you won’t be alone in an eco-system that generates new norms. This is the new youth entrepreneurial movement never seen before.
Some Fun Facts
It’s time to look at who these young entrepreneurs are according to Gen Zs in Forbes with their thinking.
- 72% believe times have been economically tougher on them, but 39% are not stopping from wanting to start another business
- 39% employ five or more employees creating an economic benefit
- 46% want lower taxes, 42% want affordable housing, 35% believe in benefits of universal basic income
- 45% using their own savings to get their business started
- 80% launched their business online or with a mobile component, while 46% began with a physical location
The Verdict
Finally, there exists no better time than the present to start your career by becoming a young entrepreneur. You’ll gain great direct business experience, life learning skills, developing your leadership and negotiation ability, while gaining resilience. Don’t be afraid to ask for a mentor to assist you to reduce the risk of poor decision-making. The key is to learn as much as possible to drive your ambition for a life long mission of success. Wishing all great rewards in the pursuit of The Young Entrepreneurial Movement.
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