10 Tax Time Tips for Small Businesses
1. Pay your taxes on time. Stay organized to avoid audits down the road and keep your taxes up-to-date – the penalties are high for late payments and not deductible as a business expense. The deadline for RRSP contributions is March 1st, 2018 and the deadline to file your personal income taxes is April 30th, 2018.
2. Get professional tax advice. Find an accountant who specializes in working with small business owners – this can save you money in the long run as tax filing can get complicated.
3. Get organized. Create binders to keep all your invoices, receipts, bank statements, credit card statements, etc. Invest in a good invoice and receipt scanner to keep you prepared when it is time to file your taxes.
4. Keep good records. Invest in accounting software to invoice clients, link your bank accounts and ensure efficient bookkeeping. Use a dedicated business credit card and bank account to separate your business from your personal expenses. Z
5. Know what’s deductible. Like many small business owners, you may not realize the expenses related to your home office and business travel can be deducted.
6. Track your mileage. Keep an accurate record of your travel when using your personal vehicle for business. You can also deduct public transport and taxi cabs when meeting with clients.
7. Get advice on big purchases. Before making any large purchases for your business, discuss it with your accountant – they’ll know the tax benefits, depreciation rates allowed and the best time to make these purchases.
8. Incorporate to save taxes. It may be advantageous to incorporate to take advantage of the small business deduction – a reduced tax rate for Canadian Controlled Private Corporations. Discuss the pros and cons with your accountant and lawyer.
9. Dividends instead of salary. Take advantage of the lower tax rate on your corporation dividends. Speak to your accountant about minimizing your taxes by paying yourself dividends instead of taking a regular salary. Z
10. Ask your accountant for tax tips. Ask your accountant if they have any tax planning tips for you. Your accountant is there to help you, so ask them questions and listen to their feedback.