If you’re like most business owners the June 15 tax filing deadline with the Canada Revenue Agency is a date that’s etched in your brain. But so many business owners procrastinate, putting off the inevitable and end up in a mad dash to get their taxes completed to meet the looming deadline. With just a few weeks left to get your filing in order, Sloan Partners offers a few simple tips to ensure you are prepared and can take advantage of all potential savings opportunities.
“Tax planning, especially for business owners is critical,” says Sloan Group accountant Roman Belenky, CPA, CGA, BAS. “Some deductions such as RRSPs, non-refundable tax credits such as charitable donations, and business deductions such as capital cost allowance (i.e. depreciation on your vehicles or equipment,) can be carried forward to future years. If an individual has relatively low net income in any given year, proper tax planning to the use of these deductions can significantly lower income taxes in a year of higher income.”
“Another key planning point is remuneration to lower income for family members who performed services for your business. Paying reasonable remuneration for services rendered may significantly reduce your tax payable. There are many issues to consider including HST, source deductions, and tax traps of which to be aware,” says Belenky. Check with your tax professional to ensure you are properly planning for tax time.
“Although unincorporated business owners are aware of the June 15th filing deadline, many are not aware that income taxes, income tax installments, HST payments, and HST installments are due earlier,” says Belenky. For example, an annual HST filer with a June 15th filing deadline has an income tax and HST payment deadline of April 30. If the individual is required to pay equal HST quarterly installments, they are due within one month after the end of each of their fiscal quarters. If the individual is required to pay quarterly income tax installments, they are due on the 15th of the month in March, June, September, and December.
“While missing payment deadlines incur interest, missing filing deadlines may incur significantly higher penalties,” says Belenky. To make sure you stay on top of deadlines, download the Canada Revenue Agency’s Business Tax Reminders mobile app, available now free of charge on most mobile platforms. The app lets business owners create custom reminders and alerts for key CRA due dates related to installment payments, returns, and remittances. For more information on the Business Tax Reminders mobile app, go to www.cra.gc.ca/mobileapps.
Take Advantage of Tax Credits
Small businesses often miss out on special tax credits available, especially within certain industries and types of businesses. Be sure to discuss new and available credits such as common research and development tax credits with your accountant.
Don’t Miss Deductions
There are many deductions business owners can take advantage of that can positively affect your bottom line. Whether you have 100 employees or run a home-based business, make sure you stay current on available deductions, from accounting and legal fees to vehicle expenses and capital asset deductions, such as computers, automobiles and furniture that may be depreciated at varying rates.
Avoid Common Audit Traps
It is very important to be aware of potential deductions that raise a red flag with the CRA. Be sure to be specific and properly classify employees and independent contractors, and be watchful of home office deductions and large miscellaneous deductions relative to your income that are watched carefully.
Avoid Interest Penalties
“Many taxpayers receive quite an unpleasant surprise after filing their income taxes and HST on June 15th only to discover they owe hundreds or thousands of dollars in interest and penalties,” says Belenky. “To make matters worse, these interest and penalties are not a deductible expense for tax purposes.”
If you find yourself or your business owing the CRA and can’t pay in full, it is important to take immediate action. The CRA will work with you to set up a payment arrangement that will minimize the interest you have to pay and help you avoid costly legal consequences. Ask your tax professional about payment options.
Look for a newly formatted PD7A employer statement of accounts introduced by the CRA in May that will make tracking and understanding your payroll obligations easier. The CRA website is a great resource for useful tips and timely updates throughout the year and at tax time.
Accurate, detailed record-keeping is a must for business owners. If you stay organized throughout the year and keep up on accounting and tracking business expenses, preparing for tax filing can be a breeze; saving you time and money come tax season. The more organized your records are, the easier it is for your accountant to prepare your returns. If you’re behind the ball this year, consider making a checklist of outstanding items like uncategorized expenses and missing documentation and begin to gather all necessary paperwork. And, make sure you have an appointment in the books with a tax professional to keep you on track for the June 15 deadline.