According to a survey by the Financial Consumer Agency of Canada, 41 percent of Canadians sought financial advice in 2019. Eleven percent of them sought advice on tax planning. The numbers show that citizens want professional support when it comes to taxes.
Filing tax reports can be a stressful process, especially for business owners. However, tax planning does not have to be a headache if you prepare for it. Here are five simple and practical tips to help you manage your taxes.
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Hire an Accountant
If you want to understand your taxes, you will need the help of a financial professional.
With their help, you can do more than prepare financial reports and pay taxes. Top tax accountants can work with you throughout the year to monitor income and spending. They can ensure your business does not have a cash flow problem. An expert accountant can also help track your gross and net profits.
You should hire an accountant right at the start of your business, not only during tax season. This way, you will have someone who can ensure your company’s financial growth.
Keep Accurate Records
Keeping records throughout the year can help ensure your tax reports are accurate. Inadequate record-keeping can land you in trouble, leading to penalties or audits.
Ensure that your personal and business expenses are in different accounts. The Canadian Revenue Agency (CRA) might start looking into your personal assets if they discover commingled money.
Look Up Small Business Tax Credits
Tax credits are as close to free money as you can get. These credits directly cut down the tax you must pay the CRA.
Here are examples of tax credits you may claim in Canada:
- Investment Tax Credit (ITC) – You can claim ITCs if you invested in your small business or purchased equipment, machinery, or new buildings.
- Scientific Research and Experimental Development (SR&ED) Tax Credit – This program lets business owners deduct scientific R&D expenses from their taxable income.
- Apprenticeship Job Creation Tax Credit – This tax credit is a form of ITC that allows business owners to claim 10 percent of their apprentice’s wage.
Try Accounting Tools
Microsoft Excel may not be enough to keep accurate records of your company’s finances. The tool does not create financial statements, and it doesn’t inform you of your most prominent vendors. Additionally, it does not note your most significant purchases for the year.
These are features you want for an efficient accounting process within your company.
Fortunately, there are accounting tools that can address these needs. You can try using different software like Xero, QuickBooks, and Sage. These solutions aim to reduce errors, save time, and create reports to help you understand your finances.
Know What’s Tax Deductible
In Canada, there are many things you can do to lower your taxes. A tax deduction adds something to your tax report so you can reduce the tax you owe.
Main operating expenses are tax deductible. Examples of these expenses include:
- Start-up costs
- Office expenses
- Business use-of-home costs
- Salaries and benefits
These are simple tips to help prepare your small business for tax season. With these pointers, paying taxes will not be a problem for your company.