When you own a small business, tax season means preparation and reflecting on your business's previous year. It also means setting aside precious time to file your business' tax return and determining and ensuring which tax credits and deductions you qualify for, to get back all the money owed you by the government.
Fortunately, there are several easy steps you can take now, and throughout the year, to make tax season painless and fruitful (by way of reduced taxable income and a larger refund to reinvest into your business).
The following is a list of the critical first steps SMBs should take to prepare and get through tax season:
- Be mindful of deadlines: file on time and pay any taxes owning straight away. You don't want to be responsible for incurring any interest on taxes owed if you miss tax deadlines.
- Expense your home office: When you run your business from home, you can claim a portion of your occupancy costs. These include rent, insurance, property taxes, Internet, telephone, repairs and maintenance. Be sure to keep all receipts associated with these costs.
- Savings on the road: Do you use your car for your business? Don't forget to claim a percentage of the expenses associated with road trips. Deductible expenses include insurance, lease, maintenance, fuel, and parking. Remember that you can only claim costs associated with using your car for business, so it's important you keep a log of your daily travel and track only those trips associated with business activities.
- Entertainment: Don't forget you can write off food and entertainment expenses from client meetings. The general rule is you can claim 50 per cent of business-related meals and entertainment.
- Track everything: When you're an SMB owner, it's easy to blur the lines between business and personal expenses. Again, ensure you log all expenses and receipts. Consider using financial management software to track these year round, which you can then transfer to tax software when it comes time to file.
- Split your income: If you have a spouse or partner who makes more than you, consider splitting your income to reduce their tax bracket and lower overall income taxes paid. If you're making more than your spouse, consider employing them and any of your children to decrease actual income by paying them wages through your business.
- Use tax software: As noted above, small business owners can claim a variety of expenses used to generate income. Tax software, like TurboTax Home & Business, makes it easy to determine all deductions and credits owed you. You can also visit the Canada Revenue Agency website for a full list of eligible business expenses.
Finally, there's one last tip I'd like to offer: engage a bookkeeper or accountant when you feel the job of solely managing your taxes or finances is becoming a challenge. If that time is now, please visit Intuit's Find A Pro, where we help you locate a trusted accountant or bookkeeper in your area, who can help you manage your finances...which gets you back to doing what you love - building your business!