Personal Finance

Is paying this amount of income tax normal?

  • Last Updated:
  • Apr 21st, 2017 6:31 am
[OP]
Sr. Member
User avatar
Nov 30, 2009
546 posts
129 upvotes

Is paying this amount of income tax normal?

If you want to yell at me and call me stupid or make fun of how I don't know what I'm doing and call me incompetent then that's fine. I'm in my early 20s and haven't filed many tax returns before. Compared to a lot of you, especially those who are older than me, I'm sure you do know a heck of a lot more about income taxes and certainly have more experience with it.

Also I apologize for putting my amount of income in this post. I was raised under the premise that revealing your income is kind of rude. So I apologize if you interpreted this post that way as it is not my intent.

Also: I do my own taxes and I have trouble finding an accountant who will do them because I work remotely for an american company from here in Canada, I have to also do a small filing in the US for the time I am there, and for whatever reason accountants I've talked to here say I needed someone with experience with international taxes (or something). Anyway, I've just been doing my own taxes and I'd rather learn how to do it myself anyway.

I calculated that I owe about 46,000 in income taxes based off an income of about 138,000. I am carrying forward my RRSP until next year mostly because I waited too long to be able to do one this year.

Anyway, I just want to know if this amount seems reasonable to you guys. I know you might think I should ask an accountant but I'm asking you. For context I'm in NS, have no dependents, and this is after I deducted tuition because I also finished up my degree this year.

I don't expect anyone here to become my accountant and give me advise I really ought to pay for but I was just wondering if anyone could tell me if this amount owing seems reasonable to you given my income.
12 replies
Deal Fanatic
User avatar
Nov 19, 2004
7041 posts
866 upvotes
Cambridge, ON
Crazy isn't it. It does sound about right without any credits or deductions. May be a little high considering you used tuition credits but hard to know without the actual numbers. Just running 138k through the taxtips calculator, you get 48,972 in taxes.
Deal Addict
Aug 3, 2014
3013 posts
1173 upvotes
Pay tax on what you earn, pay tax on what you spend, so that corrupt and incompetent people can waste it. Government scam.
Deal Fanatic
Jul 1, 2007
7783 posts
641 upvotes
If you're making that kinda money in your early 20s, you darn well should pay your FAIR SHARE in taxes! :P
Money Smarts Blog wrote:
Nov 29th, 2010 11:18 am
I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
Sr. Member
Oct 11, 2010
798 posts
211 upvotes
Charlottetown
First of all, how does the company in the US consider you. An employee, contractor etc.? How do you get paid by them? Do you receive a 1099 slip from them?

I am in a similar situation such as yourself so I understand where you are coming from. Our situation differs from most and it can be hard to find answers to common questions due to the nature of remote work (although it is becoming more common). For the past 10 years I've worked from home in Canada remotely for a US company. The only difference is 100% of my work is done remotely, I do not enter the US to work nor file taxes in the country. In Canada I'm considered an independent contractor and file my taxes as such. Typically this does not work to my advantage in terms of taxes, firstly you have to pay the maximum CPP (both ends), no EI (unless you opt to pay in to it, which has only been an option within the last 5 years or so I believe). Second, I don't have a lot that I can write off as most businesses would in terms of expenses. Basically the only thing I can do to help lower my taxes aside from RRSP contributions is business use of home expenses and some other small deductions. So that would be my only recommendation, if you are working from home make sure to read up on and properly file business use of home expenses on the t2125. You should be able to claim home expenses if you meet one of the two following criteria:

Using your home as your principal place of business; or
Using the space only to earn business income and using it on a regular and ongoing basis to meet your clients, customers or patients.

Of course if you do not own your own home this may not help you much.

I'm sure that you are aware but you would definitely also need to be paying tax quarterly by installments as well. Every time I get paid I set aside a specific amount for taxes and every three months I send that to the CRA installment payee via my online banking.

As others have mentioned the amounts seem about right based on the income level, but that doesn't mean there aren't more things you could be doing to lower that amount. With your income level I would certainly consider a qualified accountant familiar in this area, even at least to get you started and let you know how you can minimize the taxes. From there you could likely handle it yourself once you know the ins and outs of it.
[OP]
Sr. Member
User avatar
Nov 30, 2009
546 posts
129 upvotes
jfall wrote:
Apr 19th, 2017 9:15 am
First of all, how does the company in the US consider you. An employee, contractor etc.? How do you get paid by them? Do you receive a 1099 slip from them?

I am in a similar situation such as yourself so I understand where you are coming from. Our situation differs from most and it can be hard to find answers to common questions due to the nature of remote work (although it is becoming more common). For the past 10 years I've worked from home in Canada remotely for a US company. The only difference is 100% of my work is done remotely, I do not enter the US to work nor file taxes in the country. In Canada I'm considered an independent contractor and file my taxes as such. Typically this does not work to my advantage in terms of taxes, firstly you have to pay the maximum CPP (both ends), no EI (unless you opt to pay in to it, which has only been an option within the last 5 years or so I believe). Second, I don't have a lot that I can write off as most businesses would in terms of expenses. Basically the only thing I can do to help lower my taxes aside from RRSP contributions is business use of home expenses and some other small deductions. So that would be my only recommendation, if you are working from home make sure to read up on and properly file business use of home expenses on the t2125. You should be able to claim home expenses if you meet one of the two following criteria:

Using your home as your principal place of business; or
Using the space only to earn business income and using it on a regular and ongoing basis to meet your clients, customers or patients.

Of course if you do not own your own home this may not help you much.

I'm sure that you are aware but you would definitely also need to be paying tax quarterly by installments as well. Every time I get paid I set aside a specific amount for taxes and every three months I send that to the CRA installment payee via my online banking.

As others have mentioned the amounts seem about right based on the income level, but that doesn't mean there aren't more things you could be doing to lower that amount. With your income level I would certainly consider a qualified accountant familiar in this area, even at least to get you started and let you know how you can minimize the taxes. From there you could likely handle it yourself once you know the ins and outs of it.
For the work I did in the states they do treat me like an american employee (except I don't have to pay into a few things like their pension and medical stuff) and at the end of the year I would file with california and the irs and then deduct my amount paid from my canadian return, which I handle as a contractor for the time I work within Canada. Thank you for your advice on the t2125, I will have a closer look at this and see if I can expense anything further. Also, they have been sending me instalment requests and I've been paying them. The amount they ask for in instalments has been increasing each year. My dad says instalments are good because then you avoid the stress of a massive bill at the end of each year.
Thalo wrote:
Apr 19th, 2017 7:54 am
If you're making that kinda money in your early 20s, you darn well should pay your FAIR SHARE in taxes! :P
I don't mind spending 50,000 a year on taxes but I wish I had more say about how that money gets spent because I'd prefer that 50,000 go to senior centres, policemen, hospitals and teachers. Not to Syria, Israel, Ukraine, politician vacations and increased salaries, and failed ferry projects. Obviously I get that this isn't even remotely how paying taxes works, but I'd be lying if I said I was happy with how they spend all of our money.
Deal Addict
Jan 30, 2012
1179 posts
401 upvotes
TORONTO
macmee wrote:
Apr 19th, 2017 3:44 pm
For the work I did in the states they do treat me like an american employee (except I don't have to pay into a few things like their pension and medical stuff) and at the end of the year I would file with california and the irs and then deduct my amount paid from my canadian return, which I handle as a contractor for the time I work within Canada.
Under the Canada-USA tax treaty, RRSPs are treated as tax free by the USA.

However, California has taken the interesting position that they did not sign the treaty and are not bound by it, so California will tax RRSPs: https://cardinalpointwealth.com/2015/05 ... our-rrsps/

California is the only US state that does that. You may want professional tax advice on that point.
macmee wrote:
Apr 19th, 2017 3:44 pm
I don't mind spending 50,000 a year on taxes but I wish I had more say about how that money gets spent
Did you vote? :)
Member
Jul 22, 2015
205 posts
33 upvotes
Kitchener, ON
You're in your early 20's and you made $138,000 last year?! Bravo to you!! :)
Member
Nov 6, 2015
383 posts
118 upvotes
Guelph, ON
hvwozq wrote:
Apr 19th, 2017 4:31 am
Pay tax on what you earn, pay tax on what you spend, so that corrupt and incompetent people can waste it. Government scam.
Yeah, sure. Police, fire services, majority of health care, road maintenance, public parks, etc. etc., none of that was paid from taxes. No doubt there is waste, but calling it a "scam" is immature.
Newbie
Mar 25, 2017
5 posts
1 upvote
Vancouver
How about money spent on refugees, i call that a forced donation taken out of every tax payer. If government really want to know if tax payers care about refugees, they can setup NonProfit account and collect donations from people who are interested.
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Deal Addict
Dec 16, 2005
2315 posts
496 upvotes
Acheewawa wrote:
Apr 19th, 2017 8:37 pm
You're in your early 20's and you made $138,000 last year?! Bravo to you!! :)
He is in a unique situation where he is employed by a US company but working remotely in Canada.

That means he is benefiting largely by the current crappy CAD.

Since he mentioned California, I assume some silicon valley job where he benefits from a high cost of living adjustment but not actually living there. It is not uncommon for newish grads to make $100k USD in silicon valley.
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