Posts Tagged ‘Tax’

Election 2011 and Your Business: What a minority government means

By Sean Driscoll

I’m not a political commentator. However, with the recent heated election taking place here in Ontario, it was hard to resist.

With the Ontario provincial election now over, it looks like we have a minority government in Queen’s Park (just barely, with 53 seats for the Grits). While still in power, October 6th ends eight years of a majority Liberal government enjoyed by Premier Dalton McGuinty. Though some would have been happy to see a party other than the Liberals in power, a minority government can lead to deadlock (so the pessimist would argue) but could also lead to some pragmatism (the optimist would argue). Either way, we should see a lot of compromise over the next four years.

Impact on your books

Not one of the leaders of the parties would argue against job creation and helping business, especially in this still turbulent economic climate. But they do differ on how taxes should be handled, which will affect small businesses. So, the question for small business owners is: How does this election impact me? In all fairness, there will likely be little to no impact on small business operations. All the leaders promised to lower the basic corporate tax rate to 10%, while failing to add that it was already set to be lowered to 10% effective July 1, 2013. So regardless of the winner, the corporate tax rate stays the same.

Small Business Tax Rate

As it stands, small business owners in Ontario can claim the Ontario small business deduction if their taxable income is under a set amount (set at $1.5-million a year) to further reduce how much they pay in taxes. The current rate is set at 4.5%. The Liberals and the NDP both stated in their platform that they would reduce this rate to 4.0% to create a more competitive market. Interestingly enough, the Progressive Conservatives declined to state any plans to lower the rate.  While not declaring they would lower taxes, the Tories stated in their platform that they would introduce a bill of rights for small business owners. It would include the following:

  • · Red-tape reduction for fast, efficient, customer-friendly service standards when dealing with government agencies
  • · Choice over mandatory smart meter energy pricing
  • · Greater ability to bid on government contracts
  • · A formal, impossible-to-ignore voice for small business owners in debating any new legislation or regulation that could affect the economy

But with more Red and Orange seats than Blue seats, it’s safe to say that we will not see the above introduced any time soon, and will likely see a small business deduction rate lowered to 4.0%.

Sean Driscoll is an internal communications specialist with Staples Canada. A graduate of Carleton University in his native Ottawa with a B.A. in Political Science and History, Sean moved to Toronto to pursue a career in communications and holds a diploma from Seneca College in Corporate Communications. Having spent a year abroad in Dublin, Ireland, Sean acquired the gift of the gab and an appetite for travel.

Posted by Ashley in Lifestyle, Small Business Tax Tips on October 12th, 2011

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STAPLES BizTIPs 4business: Beat the Tax Man

By Small Business Expert Roger Pierce, BizLaunch

It’s tax season again and the time of year many small business owners dread. Paying your taxes is part of business life, and self-employed people usually don’t get a refund. Therefore, it’s important to take advantage of these tax-saving tips:

· Keep your receipts. A business is taxed on its profits, which is simply the difference between its revenue and expenses. Keeping expense receipts is critical in order to maximize your expenses and minimize tax. Get in the habit of keeping all business receipts and filing them every day.

· Record your mileage. Revenue Canada allows you to deduct the cost of automobile travel for business, but you must record the distance of each trip. Keep a log book in your car and simply note your odometer each time you’re on the road to business.

· Deduct the home office. If you’re running a home-based business, don’t forget to deduct the portion of your home costs used to conduct business. That may include a portion of rent, heat, hydro and telephone costs.

· Hire a pro. Hiring a bookkeeper or accountant will actually save you money because they know how to take advantage of often overlooked deductions. They can also prepare accurate annual financial statements for your banker or investors. Free up your time by outsourcing the number crunching. You can find qualified help at www.ez-as-abc.biz. 

You can learn more about this and other how-to topics at a free STAPLES BizLaunch Webinar. To find one near you, please visit http://www.staples.ca/bizlaunch today.

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ROGER PIERCE is passionate about helping entrepreneurs achieve success. Co-founder of Canada’s largest small business training company, BizLaunch.ca, he’s launched eleven small businesses of his own and personally experienced what he calls “the good, the bad and the ugly” sides of entrepreneurship.

BizLaunch advises thousands of Canadian startups through its popular how-to seminars and webinars delivered with partners such as STAPLES.

Posted by Lynnette in Small Business Tax Tips, STAPLES BizTIPs on April 9th, 2010

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Tech Tuesdays: The top five tax software programs for Canadians

By Small Business Expert Roger Pierce, Bizlaunch

Understanding the underlying principles of how we are taxed in Canada, how government-legislated tax incentives work and how to choose the tax strategy that is best suited to your business will enable you to plan effectively. What you can deduct, how much, why, and for what reasons are important facts to know before facing the tax season. If you are doing your own taxes, this can be challenging. However, there is software available to make the process much easier. Below, we have listed the top five tax software programs available to Canadians.  These programs don’t just calculate your return; they have tools to help you plan ahead.  

UFile Pro

A professional-quality tax software for those working with less than 100 tax returns. UFile Pro prepares even the most complicated tax returns for any province in minutes, including those involving small businesses, rental properties, capital dispositions, and much more. 

QuickTax

With QuickTax, you can complete your taxes from any location. It is easy and quick. Even tax planning is a snap because of the ability to run multiple tax scenarios and features such as the capital gains analyzer and incorporation analyzer. This software is available in numerous Windows versions, including one for incorporated businesses. 

TaxTron

TaxTron has a simple-to-use, step-by-step wizard that guides you through the preparation process. With TaxTron Professional, you get unlimited user license, unlimited T1 returns and unlimited priority technical support. That’s not all; the professional edition (good for accountants) also allows tax preparers to complete and EFILE Canadian T1 tax returns on behalf of their customers—all done in five easy steps. However, all the TaxTron versions are quick, easy and fully bilingual. 

GenuTax

GenuTax software allows Canadian small business owners to prepare up to 20 tax returns for each of the 2007, 2008 and 2009 tax years, without any income level limitations or extra fees per return, and an unlimited number of tax returns for the years 2003 through 2006. The software also offers a simple listing of all the necessary information slips and tax forms that GenuTax supports for the 2009 taxation year. The bonus: when you purchase GenuTax, all future annual updates for the income tax software are free. 

CanTax

Catering to Canadian small businesses and tax professionals, CanTax has been around since 1985, with a professional product launched in 1989. For small businesses, the CanTax T2 and T2 Plus for professionals preparing corporate tax returns, is your best bet.  You will have all the forms you need to prepare returns for every province and territory, except Québec. And if you are a tax preparer and have clients doing business in more than one province, CANTAX T2Plus can handle their returns.

ROGER PIERCE is passionate about helping entrepreneurs achieve success. Co-founder of Canada’s largest small business training company, BizLaunch.ca, he’s launched eleven small businesses of his own and personally experienced what he calls “the good, the bad and the ugly” sides of entrepreneurship.

BizLaunch advises thousands of Canadian startups through its popular how-to seminars and webinars delivered with partners such as STAPLES.

Posted by Lynnette in Small Business Tax Tips, Technology on April 6th, 2010

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Income splitting by paying salaries to spouse and children

Brought to you by tax analysts from the QuickTax Business Incorporated and Unincorporated team

A penny saved is a penny earned, as they say. “They” must have been a small business owner, because any time you can reduce costs, you improve your bottom line. When it comes to tax time, finding all your allowable deductions will help get back every penny you deserve.

Whether you are carrying on a business personally (ie. self-employment) or through a corporation, one of the most cost-effective ways to save taxes is to use a strategy called income splitting. The term ‘income splitting’ refers to a process of splitting income amongst family members (ie. spouse and/or children) to achieve a lower overall tax burden by reallocating income to be taxed in their hands.

If your spouse and/or children work for you in your business, you can achieve income splitting simply by paying them salaries. Salaries paid to them from your business are tax deductible as long as the amounts are reasonable and that the employment services are genuine. So, what’s considered a reasonable amount of salary for your spouse or children? Well, a simple question would be to ask yourself how much you would pay a third party dealing at arm’s length for the same employment services rendered.

Here are some of the pros and cons of income splitting by paying salaries to your spouse and/or children:

Pros

  • Lower overall tax burden by utilizing the lower tax rates that the spouse/children have relative to you / your business
  • Creation of earned income for future RRSP contributions for family members
  • Taking advantage of spouse’s and children’s personal tax credits which otherwise would not have been utilized by them in their own tax returns

Cons

  • Need to withhold and remit payroll taxes for the salaries paid to your spouse and children
  • Need to file additional T4 slips (Statement of Remuneration Paid) for your spouse and children
  • May lose some personal tax credits including spouse or common-law partner amount

As with any tax-saving strategy, careful consideration and planning should be given to achieve the best desired effect and to avoid any negative tax consequences. Income splitting can be complex and may require assistance from a tax professional. However, if done properly, this is an inexpensive way to help you get back every penny you deserve.

Tax tips brought to you by tax analysts from the QuickTax Business Incorporated and Unincorporated team

Posted by Lynnette in Small Business Tax Tips on February 25th, 2010

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HST Part 2: Get ready, get set, go.

In spite of all the hoopla around the recently announced HST in Ontario and BC, consensus seems to be that once it kicks in next summer, the new harmonized sales tax will help reduce paperwork (after the transition of course!) and lower costs by allowing small businesses to recover the provincial part of the tax through income tax credits – something you weren’t able to do till now.

Whatever the net effect, HST will probably soon be a fact of life, so it’s a good idea to start preparing for the arrival of it now.

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BDO Dunwoody’s JumpStart resource centre for entrepreneurs offers some things Ontario (and BC) small businesses should think about before the July 1st transition date rolls around:

1. Converting your systems. Invoices, sales receipts, purchase orders and expense reports will likely need to be modified. If you have complex billing cycles that straddle the transition time, you may have some other challenges to deal with.

2. Budgeting for HST. While you’ll need to factor in implementation costs – including any required system changes – into your budget, you’ll also be able to recover previously unrecoverable PST as income tax credits, which will reduce your business costs once the HST is implemented.

3. Reviewing contracts. You’ll have to review your contractual obligations with partners to determine the impact of harmonization and even possible refund opportunities, if any.

4. More planning. You should review planned expenditures as the conversion date approaches and determine whether they’re subject to PST that can’t be recovered. If possible, these expenditures should be incurred after June 2010 so that the provincial component of the taxes paid qualifies for an income tax credit.

You’ll find more helpful transition information here.

Have more questions about the new HST? Ask us and we’ll do our best to answer or point you in the right direction.

Posted by Lynnette in Small Business Tax Tips on December 24th, 2009

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HST Part 1: Good news or bad news for small businesses?

The country is abuzz and abuzz and abuzz with talk about HST. For those of us old enough to remember the battles over the introduction of GST in the late 80s and early 90s, HST is déjà-vu.

It started when both the British Columbia and Ontario governments announced plans early in 2009 to merge their respective provincial sales tax (PST) with the federal GST by mid-2010, creating a so-called harmonized sales tax – or HST – of 12% in B.C. and 13% in Ontario.

So what’s all the fuss about?

According to a recent survey by the Canadian Federation of Independent Business (CFIB), 75% of business owners said the increased tax burden on consumers would be harmful and 44% worried about growth in the underground economy.

On the other hand, Andrew Coyne points out that Quebec, Nova Scotia, Newfoundland and New Brunswick have already harmonized their provincial taxes with the GST to negligible to positive effect – and so have 143 other countries.

 

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So, will the HST hurt or help? I’ll leave you with these benefits for small businesses outlined by Jane Adams at KPMG Canada:

1. Despite taxes on more items not currently taxed by the PST – like commercial rents and utilities – you’ll likely end up paying less taxes on your purchases.

2. If you sell GST-taxable goods and services, you’ll be able to claim input tax credits for HST paid on most of your expenses and capital assets.

3. Even if you can’t claim input tax credits, you’ll likely save significant amounts of paperwork generated from having to deal with two separate taxes.

4. In Ontario, if your sales are less than $2-million, you may get a credit of up to $1,000 to offset transition costs.

In Part 2 of my post, I’ll outline the steps small businesses can take to get ready for HST.

What’s your opinion? Do you think the new harmonized sales tax will help or harm your business?

Posted by Lynnette in Small Business Tax Tips on December 23rd, 2009

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