Whoever said “Don’t sweat the small stuff” never ran a business. The small stuff is going to matter big time when it comes to filing your business-related taxes.
Make sure your new business is going to be able to file all the necessary tax documents accurately and on time by following the advice below.
1) Have an accounting system in place from Day 1.
One of the biggest mistakes many new business owners make is to do their own bookkeeping. He who says, “I only have a few clients; I’ll just keep track of it all on a few spreadsheets,” is he who ends up missing potential tax deductions and/or being penalized by the Canada Revenue Agency (CRA) for filing inaccurate or incomplete information.
No matter how small your business is when you’re starting it, you still need to have a “proper” accounting system in place, whether that be accounting software such as QuickBooks or an experienced bookkeeper.
2) Learn what has to be filed when.
The fact that you need to pay your annual GST/HST by January 31st or that you have to file a corporate income tax return as well as a personal one should not come as a surprise to you at the end of the year. When it comes to taxes, ignorance is no excuse and late filers are penalized.
So take the time when you’re first starting your business to find out what taxes your new business is going to incur and when the various tax filings that apply to your business are due.
3) Don’t delay registering for the appropriate CRA tax accounts.
For one thing, registering as soon as possible for the necessary tax accounts will make filing the necessary tax forms smoother when the time comes.
For another, some registration is time-sensitive. For instance, if you have been running your business as a Small Supplier and go over the $30,000 limit, you need to register for GST/HST within 29 days of the day your business exceeded that limit.
4) Have a system for filing receipts.
Software and/or cloud-based accounting is a wonderful aid to tax preparation for your new business – but there are still some things that it can’t do for you, such as ensure that you keep and file all the paper tax receipts you accumulate during the year.
So school yourself to keep every business-related receipt and file your receipts in an organized fashion so they’re easily accessible at tax time. You’ll definitely pat yourself on the back when you’re calculating your small business deductions.
TAX TIP : Be sure to also keep your business-related receipts from the period when you’re getting ready to start your business; you may be able to claim some of the expenses you incurred preparing to open your business as tax deductions on your income tax.
5) Estimate your income tax bill in advance and set money aside to pay it if necessary.
This one is hard for many new businesses but extremely useful if you can manage it. Just as with your personal taxes, paying your business taxes by instalments avoids having to make one huge payment when the tax due date falls.
While it can be difficult to estimate how much income your business might bring in in its first year, you should be able to make a good guesstimate by keeping an eye on the assets and liabilities on your balance sheet.
6) Get some expert help.
For many new small businesses, the first person hired is an accountant. An accountant who is experienced at working with small businesses can provide invaluable advice about financially managing your new business and keeping it tax compliant. He or she should also be able to inform you about tax strategies that can save your business some time and money.
Good tax software can also provide you with expert advice that will help you prepare for tax time. TurboTax, for instance, offers a great deal of income tax advice within the program and the option to chat with or call tax experts.
Think First or Pay More Later
Who wants the tax tiger chomping up their profits? Make preparing for business taxes a priority and keep more of your new business’s profits for yourself.