Telsec Business Centres is not an accounting firm, but we do have a number of accountants that rents office space within our business centre. Some of the tips we want to share come from those office clients, while others are tips that they told us to share with our tenants and other readers of this blog.
While not all Canadian businesses have the same year end, many small business owners and entrepreneurs file their business taxes at the same time as their personal taxes. This is because many of those small businesses are not corporations and are sole proprietary owners. Yes, most tax issues are the same for corporations and sole proprietor small businesses. There are tax tips that small businesses need to know that are either specific to small businesses, or that amy take a team of accountants to apply to assist corporations.
Before we offer the tax tips that were recommended for us to share, we should tell you that there are many websites such as taxtips.ca, Intuit.ca and even the Canada Revenue Agency (cra-arc.gc.ca), that have some great tips and helpful information that is specifically aimed at small businesses and entrepreneurs.
Canada Revenue Agency (CRA) provides free seminars, as well as many online videos and publications, to assist entrepreneurs and small businesses in learning about government services, GST/HST, and personal income tax issues. These free seminars are offered in most provinces, and are often combined with seminars on provincial sales tax, payroll, and other tax-related topics.
The most important tip that our accountant tenants preach, is that tax time is not the only time you should be investigating tax tips. You should be looking for tax tips throughout the year. And there are things you need to be doing in your bookkeeping throughout the year that have tax-time implications.
If you use your car for business, you may be entitled to claim a reasonable portion of gas, license and registration fees, interest on car loan, insurance, lease, maintenance and repairs due to work-related use and parking. The catch is to be sure you distinguish between business and personal use when claiming automobile tax deductions. This means keeping a log of your odometer when using your car for business. It’s about the record keeping that will allow you to justify these expenses.
Is your home is your main place of work/employment? If yes, you may also be entitled to claim a portion of your occupancy expenses such as rent, mortgage interest, property taxes, insurance, utilities, telephone and some minor repairs and maintenance that are related to the area that you work out of. The amount that you can claim varies based upon the amount of space and amount of time that particular space is used for business.
Self-employed individuals and small-business owners are entitled to claim deductions for expenses as long as they are reasonable and incurred to earn income. The most common deductions include goods purchased for resale, office supplies, virtual office services, consulting fees, salaries and benefits, travel-related business-only expenses, insurance, equipment purchases and rentals, bank charges and even repairs and maintenance to equipment. And don’t forget about entertainment expenses incurred to earn income – such as meals with clients, coffee, drinks in the bar and yes, gifts to clients.
Under the new Small Business Job Credit program, you may be eligible for a refund of employment insurance premiums paid for both in 2015 and 2016. If you are eligible, the CRA will automatically calculate the amount of your credit using the EI information from the T4 slips you filed with your 2015 and/or 2016 T4 information returns. The bonus is there is no application form to complete.
Small businesses often miss out on special available tax credits. For example, Ontario’s apprenticeship training tax credit, which can pay up to a $10,000 supplement for the wages of an apprentice in many industrial, construction and other related trades. Small businesses involved in the manufacturing, food or high-tech industries might be entitled to scientific research and experimental development tax credits. Missing out on potential tax savings can affect the bottom line of your small business.
A good accountant will remind you to not miss out on declaring business expenses that are often overlooked. Even the fees you pay to your accountant or lawyer can be claimed as expenses. Those capital asset deductions, for assets belonging to the business such as computers, automobiles and furniture, can be depreciated at varying rates – and are often forgotten.
When you are trying to make deductions for mixed use (business and personal) items and assets, be careful to have good records of how much they are used for business. If you try to claim more than you used for business, you could be hoisting a red flag that could cause your small business to get an audit from CRA.
Salaries to family members who help and assist in running your small business can bring you into a lower tax bracket, but be careful to keep them reasonable and document the work they have done and the amount of time they spent working for you. On that same note, consider paying yourself as a salaried employee of your small business, rather than collecting dividends as a business owner. It is important that you discuss this option with your accounting professional, because there are pro’s and con’s to this approach that depend on your individual tax situation.
Our last tax tip? Well, sometimes doing it yourself is NOT the best option. There are a lot of tax tips and advice out there that will help you. But when it all comes down to actually filing you taxes, it is best to get the advice of a professional. You can do what you can to have all your ducks in a row to save the time of your accountant, but letting them do the actual final paperwork will likely save you a lot of money down the road. Remember, a good accountant does not just know accounting inside-out. He or she is also up to date with our often complicated and ever-changing tax laws.