Tax return tips for canadian small businesses

1. Tax Return Tips for Canadian small businesses

2. Being self-employed, and owning your own small business entails as much responsibility as it does freedom. This is particularly true at tax time. Here are some tax tips to help ensure you don’t pay more tax than you have to.

3. 1. Know your eligible expenses • Money spent on your work as a small business owner can be claimed as a tax deduction under reasonable circumstance. • If you are an independent contractor, some popular eligible business deductibles are material and supplies (including equipment), rent, travel, and continuing education.

4. 2. Know What You Can’t Deduct • Understanding what you can and can’t claim as business expenses is critical. • Entertainment expenses provide a classic example of potentially claiming too much. If you took clients to a hockey game, you can only claim up to 50% of the cost of that hockey game, not the whole thing.

5. 3. Keep track of your money • As a small business owner, tax prep begins the moment you make income through the business. • In the event that you are audited by CRA, it is crucial to have a receipt present. They should be kept for at least 7 years. Although you might still win a case without a receipt, you would have to go to many unnecessary lengths.

6. 4. Consider Paying Income Taxes Every Month • If you have trouble budgeting or simply don’t like the idea of one massive payment at the end of each year, consider paying income taxes monthly. • In order to do this, you can inquire with the CRA. It is possible to set them up as an online vendor.

7. 5. Split Some Income • Depending on your business structure and the work you do, it may be advantageous to hire a family member with a lower income than yours to do some of the work. • For example, paying a stay-at-home spouse to handle record keeping could entitle him or her to a wage that reduces your overall family tax bill when it’s taxed at their rate instead of yours.

8. 6. Create A Seperate Company For Tax-Deferred Investing • Outside of registered retirement plans, you normally invest with after-tax dollars. Instead, you can move funds out of your business to a related holding company. • In this way, you trigger no tax payments. You can then invest the CRA’s cash as you would your own personal funds. You will pay the tax eventually, but until then, you will have a bigger pool of capital to invest.

9. 7. Hire a tax return service • They can help you prepare the small business tax returns to ensure you are able to maximize your earnings, by professionally reducing your tax liabilities.

10. Thank You!