As the year is coming to a close, it’s a time for many business owners to manage their business from a tax savings perspective. During this period, it’s important to look at the opportunities available to you. Here are some examples:
Tax Credit Opportunities
There are Federal and Ontario government programs in place that provide business owners with tax credits for hiring apprentices. Also, businesses involved in manufacturing, food, or high tech might be entitled to scientific research and experimental development (SR&ED) tax credits available federally.
Business owners need to remember to include expenses for eligible items like legal and accounting fees, computer purchases, software has a faster right off, automobile purchases, office supplies and furniture and equipment.
Tracking your business expenses has become easier over the past few years thanks to technology. In lieu of the infamous shoebox of receipts new cloud based accounting programs like FreshBooks are available that can automatically sync your business expenses with their software so you can avoid manual data entry. Also Intuit Quick Books is good stand alone software for many business owners that makes the year end tax preparation process easier to submit information to your CPA. You may need some training to reduce learning curve on the software before you get going as in anything software is a tool and is only as good as the operator.
It’s important to keep your business and personal bank accounts separate for this purposes. Otherwise it will create year end headaches to separate the expenses at year end.
It’s common for people to assume that their entire car expenses are a write off. Typically you drive your car for both personal and business purposes, so you need to track the mileage you’re using for business purposes. Please note that trips to the office and back don’t count either as an employee (special exceptions exist for those on call or with tools they need). It’s important to be accurate with your log and expenses and have the backup documentation for this in order to avoid being Re-Assessed by Canada Revenue Agency (CRA). There are free smartphone apps available for you to keep track of your business and personal mileage accurately.
Meals are another commonly overstated expense. Please note that only 50% of your meals are deductible as a business expense (except the annual Christmas Party if all staff are invited as this 100% deductible). So it’s important to ensure that this is properly allocated in your records as either 100% deductible or 50% deductible for your accountant before it’s submitted to the CRA. Also, watch those gift cards for Tim's and Starbucks as they are only 50% deductible as well.
Home Expense Claims
Many home based business owners claim the expenses related to a percentage of their house expenses such as utilities, insurance, repairs/maintenance, mortgage interest, and property taxes. Also, please note that when you’re calculating the percentage, factor in any relevant business storage and remember that some claims are limited by local by-laws.
If you have member in your household who is legitimately helping you in your business, it is reasonable to pay them a salary for their time. This is especially helpful if they’re in a lower tax.
bracket. Please note that EI may or not apply (contact Peter Wiesner CPA, CA for further advice) and CPP applies to those 18 to 70. You can complete a form the CPT30 at age 65 in order to stop submitting CPP if you like.
As a business owner you have until June 15, 2016 to file your 2015 income tax return. However, if you are owing taxes based on your return, interest will start accruing as of April 30, 2016. It’s important to start getting prepared now so you can submit accurately and on-time. Also, the Foreign Reporting T1135 form is due April 30, 2016, even if your personal tax return is due June 15th, 2016. So don't delay in filing if you own foreign assets (rental property, foreign stocks, foreign currency) more than $100,000 in Canadian value.
Notice to Reader - Warning and Disclaimer
This monthly update was prepared on November 16, 2015.
When considering any of ideas from this article, please contact the writer directly before acting on them. This will ensure that any information has been updated.
Without contacting the writer before implementing any of these items you will bear all the responsibility for any tax assessments and or business issues that may arise from this information.
Copyright @ 2015