Stay stress-free this tax year.
Unless you’re an accountant, tax time is one of the most stressful times for the majority of Canadians. This is especially true if you’re a business owner.
In addition to handling the day-to-day operations of your business, you also have to worry about gathering invoices, reporting your expenses and, if you have employees, making sure that their forms are filled out properly.
As a small business owner myself, I know these feelings of anxiety and stress all too well. However, there are some things you (and I) can do to make this time of year less riddled with anxiety and less of a burden on both our personal and professional lives.
1. Get to Know Your Write-Offs
One of the boons of being a business owner is the “business expense” option available to us. Namely, that we can write off expenses, such as our cell phone bills, Internet costs and even meals and travel at the end of the year, as long as they’re business-related.
Some items you may be able to write off include:
● Home office deductions. Did you know you can claim your Internet costs if you work from home? It’s true, so make sure you include it.
● Startup costs. Do you need any permits or licensing, or did you hire a copywriter to jazz up your website? Write that off, baby!
● Inventory. Most brick-and-mortar businesses have inventory costs which can also be written off.
● Office supplies, furniture and equipment. Did you need to buy a new laptop for work or replace an old broken desk for your employee? That’s a write-off.
● Mileage. Make sure you keep track of your work-related travel, because you can write off the gas you spend driving to meetings and worksites.
● Software and subscriptions. Most businesses rely on a variety of SaaS (Software as a Service) tools to operate day-to-day, including accounting software, website hosting, industry-specific software and more. Don't forget to review all the SaaS subscriptions, large and small, that your business uses.
● Telephone charges. If your business has a landline, if you use your cell phone for work and especially if you provide cell phones for your employees, make sure to add these expenses to the list.
● Contributions to your retirement fund. Are you paying into an RRSP? Add that to your list of write-offs, as well.
● Food, entertainment and travel. Make sure to always save the receipt when you pay for a meal, drinks, entertainment or work travel. Write down who a meal was with or the purpose of the expense on the back of the receipt for helpful reporting when it comes to tax time.
● Applicable insurance premiums. Check with your insurance provider to see if you qualify to write off a portion of the premiums you pay.
If you’re unclear about what you can and can’t write off, make a point to speak with your accountant (see point 4) and ask them specifically about the items you’re unclear about. It’s their job to help you claim as much as possible, so don’t be afraid to ask for help.
2. Take Photos of All Your Receipts
If you’re spending money to take a client out for lunch, staying in a hotel while on a business trip and driving to meetings or events, it can be insanely hard to keep track of all of your receipts.
One of the best expense-related business tips I’ve ever been given is to take photos of all of your receipts, then save the photos in a dedicated folder on a cloud server. Personally, I have a “Taxes” folder on my Google Drive with a “Receipts” sub-folder, where all of my photos of my receipts go.
Of course, it’s prudent to also hang onto the original receipts themselves, so I also write the date, name of the business I’m meeting with (or purpose of the trip), and who I met with on the back of the receipt as mentioned earlier. I also make a note on the corresponding image file as well. This way even if the receipt fades to nothingness (as receipts tend to do) I still have a copy in case I get audited.
3. Meet Your Accounting Deadlines
You’d be surprised how many people who have an accountant on their payroll still forget to submit their expenses and paperwork in a timely manner. But if you fail to claim and file within the specific deadlines you may be subject to steep penalties—and you don’t want to have to pay the Canada Revenue Agency more money than you have to, right?
This is especially important if you run a small business, since many smaller companies operate within tight margins. A big fine from the Canada Revenue Agency may result in penalties so steep that the business has to close in order to pay off the debt.
So if you’re being wishy-washy on meeting your accounting deadlines, just remember: your business could be on the line as a result!
4. Get Help
I cannot stress this one enough: if you are a business owner and you don’t have your CGA designation, it’s unlikely that you’re qualified to file your own taxes. You can get answers and forms on CRA's website, but having all the right accounting knowledge and up-to-date experience at tax time is another thing. There is an answer…
Invest in a professional—it’s even tax-deductible.
This is well worth the investment, as there are a variety of things that could go wrong if you file yourself including missing deadlines, misreporting costs, accidentally not reporting items… the list goes on. And it puts your business at risk.
You can find a professional accountant who can help you organize your tax files, GST/HST payments, invoicing, associated paperwork and a whole lot more. And they'll keep this all organized online with a program like QuickBooks or one of the many other programs designed for this purpose. You can then collaborate with your accountant using that software for your future tax files and receipts so you're always on top of that important admin work.
Bite the bullet and do yourself a favour by letting a professional keep your finances safe and secure.
Do you have any tips for tax time? Tell us in the comments.