Tax season is upon us! If you’re a small business owner, preparing your taxes can seem like a daunting and challenging task, but it certainly doesn’t have to be.
Here are nine tax tips for small business owners in Canada to take advantage of.
1. Hire an Accountant
At first glance, it might seem like an unnecessary expense to hire your own accountant, but that couldn’t be further from the truth. An accountant will have no trouble completing your taxes and will ensure you’re maximizing business deductions to save as much money as possible. In the end, you’ll most likely save money on your tax return.
2. Keep Good Records
It’s imperative that you keep good records. If you ever get audited, you want to be able to hand over everything the CRA needs quickly and easily. You can’t do that if your paperwork is in disarray or non-existent. Keep good records, and also keep your records for at least seven years.
3. File on Time
One of the most important tax tips for small business owners in Canada is to file your taxes on time. This seems rather basic, but many people don’t do it and it ends up costing them. When you’re late filing your taxes, you could end up being subjected to interest payments on top of what you owe the government. Why pay more for filing late when you don’t have to?
4. Contribute to Your RRSP and TFSA
Each year, there’s a maximum amount of money you can put into your RRSP and TFSA. If possible, contribute the maximum amount. Not only will you be saving money, you’ll also reduce the taxes you’ll have to pay come tax time.
It’s an easy thing to do to save money.
5. Switch to Health Spending Accounts
When you switch your business over to a health spending account from traditional health benefits, you’re able to receive a tax deduction each year. Your employees also don’t pay tax on any benefits they pay for using their health spending accounts as long as they’re CRA approved.
6. Claim Home Business Expenses
Tax tips for small business owners in Canada working from home include claiming home business expenses. Some of these expenses include rent for the cost of your office, internet and phone usage, utilities, repairs, and insurance.
Ask your accountant to make sure you’re claiming everything you can.
7. Claim Vehicle Expenses
If you drive a personal vehicle for your business, you can claim some expenses here as well. Keep a record of your mileage every time you use your car for business. You can also claim some of your insurance, lease payments, parking, toll charges, and maintenance.
8. Meals and Entertainment
If you entertain for work, you can claim 50 percent of those charges on your taxes. This includes meals purchased to take out clients and the cost of entertainment, such as tickets for events, gratuities, cover charges, and room rentals.
If you’re having staff parties or registered charity events, 100 percent of your expenses are deductible for up to six parties/charity events.
9. Keep Home and Business Separate
Keep your home and business expenses separate. When you don’t, you create confusion for the CRA, and you’re more likely to get audited, which is something that no one wants. Have separate bank accounts for your home and businesses expenses, and separate records as well.
There are many tax tips for small business owners in Canada, and these are just a few. Don’t be daunted by tax season. Make it easy by following these tips and giving yourself enough time to file your taxes by the due date.