A small business owner faces many struggles everyday just to stay in business. The reporting requirements and red tape continues to grow each and every year. At the end of the year, its tax time; the time of the year every small business owner dislikes. Sorting out books and records and paying the government always gets in the way of running your business. However, yearend does force us to clean-up the books and get a grasp of the revenues and expenses. The following small business tax tips will help every small business owner prepare and overcome the tax challenges.
- Competent tax advice
there is nobody else that will understand your business better than you. However, when it comes to taxes it may not be your specialty. Getting competent tax advice from a qualified professional can make a big difference to your business. Find the right tax accountant for your business that will guide you and help you overcome tax challenges.
- Do the math
Understanding the finances of your business is very important. This would require you to do the math and keep all the records up to date. This will give you a snap shot of exactly how your business is performing month to month.
- Pay your taxes on time
there are steep penalties and interest applied by the CRA on late filings. Paying taxes on time will help reduce penalties & interest. Late filings will also tie you up with more paperwork and increased accountant fees. Paying taxes and other liabilities on time will help build trust and a good reputation for your business.
- Log your travel
Business owners are always on the go and traveling to generate income. Keeping a log of your travels can help generate tax deductions for your business.
- Use government tax credits
the federal and provincial government offers many tax credits and tax deductions to small business owners. It’s important to speak with your accountant to utilize them. There are deductions available for home office and personal car used for the business and even hiring a student.
- Incorporating your small business
incorporating your business can have legal and tax benefits. By incorporating your business, owners can take advantage of the tax credits such as the Small Business Deduction which brings the tax rate to 15.5% in Ontario. It’s important to speak to your accountant and lawyer regarding this.
- Income splitting with family members
Splitting income by legally employing family members can help reduce the tax rate.
Work closely with your accountant and financial planners to overcome the yearend tax challenges. Engage your accountant in advance so they have time to make a plan of action and implement strategies.