Preparing for tax time and maximizing your expenses

It’s been said that the only certainties in life are death and taxes. If that’s true, then why does the approaching income tax deadline – a deadline that arrives with certainty each and every year -- seem to catch so many small businesses off guard?

It’s human nature to procrastinate, but we know it’s in our best interests to make tax preparation an ongoing exercise throughout the year; it, keeps us organized and prevents that mad scramble to pull everything together a month before deadline.

Well, the deadline is fast approaching, and if you haven’t been as organized as you’d hoped (but resolve to be better organized next year, for sure!), here’s a quick checklist that can help you prepare for tax time, even in these final weeks.

Talk to your bookkeeper. Your bookkeeper may not do your taxes, but he or she can help you answer any questions your tax preparer may ask you. Set up time to go over last year’s books to review your balance sheet, ensure all your accounts are fully reconciled, and go over any issues from last year that aren’t yet resolved. Knowing your books will make the process easier for you and your tax preparer.

Organize your expenses. Review your personal accounts to look for any business expenses you may have paid from them. If you act quickly, you can reimburse yourself from your business account before the end of the tax year.

Likewise, you may have used a business credit or debit card to pay for personal expenses, so examine your business accounts and properly record those expenses so they’re not incorrectly deducted as business expenses.

Be aware of income tax return deadlines. In Canada, small businesses that are sole proprietorships or partnerships must submit their T1 package by June 15th. If you owe money, you need to pay it by April 30th to avoid penalties. Corporate income tax must be filed within six months after the end of your business’s fiscal year. Small businesses that have a balance owing on its corporate income tax must pay it off within a certain amount of time – usually within two months of their fiscal year end.

Pull together your paperwork. Some of the documents you’ll need to bring to your tax preparer (and that you will need to keep on hand and in a safe place in case you are audited) include:

  • Income summaries
  • Expense summaries
  • Previous tax returns
  • Documents previously received from the CRA
  • All forms, slips and summaries your business filled out or filed over the past year
  • Financial statements for the previous year
  • Certificates of incorporation
  • Relevant bookkeeping and accounting documents

Get the most out of your expenses. As important as knowing when you have to pay any taxes owing is knowing what you can claim to reduce the amount you owe. Small business owners are eligible for a number of tax exemptions and deductions that can make tax time just a little less painful, including:

  • Business management expenses such as annual licence fees, business taxes, membership dues for professional organizations and fees for trade or commercial associations.
  • Business insurance premiums, including general business liability insurance, business property insurance, and business interruption insurance.
  • Media advertising costs for Canadian market television and broadcast stations and Canadian market magazines and newspapers.
  • Expenses for meals and entertainment related to entertaining clients -- these are 50 per cent tax deductible. Staff events or parties (up to six events a year) and registered charity fundraisers are 100 per cent deductible.
  • Expenses for business travel to two professional events or conventions per year, including public transportation fares, hotels and meals.
  • Capital property, such as vehicles, furniture, fixtures, equipment, computers, buildings and other assets that provide benefit to your business. See the CRA’s list of depreciable property to learn the amount you can claim.
  • Employee salaries and benefits, with deductions allowed for Canadian pension plan contributions, employment insurance premiums, and workers’ compensation amounts.

Of course, check with your tax preparer to see if there’s more you need to have in order, and check the CRA website to find out what’s new for this tax season. Most of all, good luck, and may the exemptions be with you!


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