Having a thorough understanding of Canada’s tax law will provide you with everything you need to know about maximizing deductions and minimizing the amount you have to pay to the Canada Revenue Agency.
Unfortunately, there is a lot to know when it comes to Canada’s ever-changing tax codes.
That said, being aware of some basic tax filing tips could save your business thousands of dollars. Using tax professionals that specialize in your industry and small business taxes could end up saving you even more.
Below are some important business tax filing tips to keep on your radar come tax season.
Don’t Miss Deadlines
Deadlines are important when it comes to filing your business taxes. While most Canadians file their personal income tax on April 30, business taxes need to be filed on or before June 15.
But, if you have a balance owing for 2017, you need to make sure it’s paid on or before April 30, 2018, just like everyone else. If your small business tax return is not filed by June 15, you’ll be hit with interest and other penalties.
Take Advantage of Income-Splitting and Pension Sharing Options
The federal government is getting a lot of resistance from Canadian small business owners when it comes to their proposed small business tax. For now, when it comes to filing your business taxes and minimizing what you pay to the Canada Revenue Agency, make sure to take advantage of income-splitting and pension sharing.
Income splitting can save business owners thousands of dollars in income tax. By paying a family member for legitimate work done with the business, it can take your income from a higher tax bracket to a lower one.
If you receive income that qualifies for the pension income tax credit, you can assign up to half of that income to your spouse or common-law partner. Or vice versa.
You can apply to share some of your pension retirement income that is eligible to split with your partner.
The intent of income splitting is to shift income from the higher income earner to the lower-income partner.
File a Tax Return Even If You Don’t Have Any Income
Just because you or your spouse didn’t earn any money in 2017 doesn’t mean you should skip filing a tax return come June. More and more benefits are attached to the tax system and not filing a tax return means missing out on thousands of dollars in lost benefits and tax credits.
For starters, this includes the GST/HST credit and, if applicable, Canada Child Tax Benefit. Some provinces also offer sales tax credits and property tax credits, but if you don’t file your taxes, you don’t qualify for these credits.
Don’t Forget About Personal and Business Expenses
Claiming personal and business expenses are one of the best ways to reduce the amount of income tax you have to pay to the Canada Revenue Agency.
Eligible business expenses can include a business license, cost of developing a web site, advertising, car, and even furnishings for the office—anything you do to help make your business profitable.
If the business operates out of the home, you can deduct some of the maintenance costs, home insurance, electricity, etc. You might also be able to claim some of the rent or mortgage interest.
In addition to current expenses, businesses can deduct a percentage, each year, of major capital expenditures, including computer and office equipment, furniture and fixtures, machinery, software, vehicles, machinery, and buildings.
FBC, Helping Business Owners and Self-Employed with Their Tax Returns
Preparing and filing taxes is a lot more complicated when you run a business. You don’t get a simple T4 slip and simply fill in the blanks; there’s expenses, income splitting, deductions and filing GST/HST. You need to collect and keep track of all receipts for 6 years and make sure you know where all the money went.
While basic income tax software might work for those who are employed by someone else, for those who own their own business, it’s best to call the business filing tax professionals at FBC.