FBC [ebook] 7 Big Mistakes Small Business Owners Make At Tax Time

© Farm Business Consultants Inc. (FBC) http://www.FBC.ca

7 Big Mistakes Small Business Owners Make at Tax Time


Copyright © 2013

Farm Business Consultants Inc. (FBC)

All rights reserved. No part of this book may be reproduced, stored in a

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Disclaimer

All the material contained in this book is provided for

educational and informational purposes only. No

responsibility can be taken for any results or outcomes

resulting from the use of this material.


96 Years of Temporary Taxation

If tax stuff interests you, check out our

[Infographic] “The Canadian Tax Landscape –

96 Years of Temporary Taxation” detailing how

far we’ve come since the first personal and

corporate taxation occurred in Canada during

World War One.

For the full [Infographic], click here:

http://www.fbc.ca/blog/96-years-temporary-

taxation-canada-infographic


Preface

With over 20,000 farm and owner/operator small businesses served by

our 12 offices in Ontario, Manitoba, Saskatchewan, Alberta and British

Columbia, we know the importance of making sure you get to keep every

single penny that you’re entitled to under the laws of Canada when filing

your personal and corporate taxes.

The correct approach to deciding which strategies to follow as well as

diligence around record keeping are the two magic ingredients of any

sound financial plan for family businesses.

Last year, we saved $37M in taxes for FBC Members. If any of these

strategies seem like they might work for you, we invite you to talk with us:

www.fbc.ca/contact-us or see what a membership might look like for you

and your business: http://www.fbc.ca/tax-services/build-my-membership.

Remember, we come to you!


As a small business owner, you’re busy wearing many

hats. You don’t have time to be a tax expert, too!

Avoid these mistakes and you can master the visor:

1. Overlooking lesser known tax deductions

2. Forgetting to give credit where credit is due

3. Missing tax filing deadlines, or not filing at all

4. Commingling personal and business finances

5. Neglecting to make tax-savvy investments

6. Failing to let your family lend a helping hand

7. Ignoring government incentive programs


Mistake 1: Overlooking lesser known tax deductions


You probably know about many of the tax deductions

available to your business — operating costs like supplies,

advertising, office rent, etc.; meal and entertainment costs (don’t forget the 50% rule); and auto expenses (be sure to

keep an accurate auto mileage log).

Of course, if you operate your business out of your home

you can deduct a portion of utilities, property taxes, house

insurance, and mortgage interest.

But, did you know you can write off the amortization of assets including intangible ones such as goodwill,

trademarks, and some patents? What about writing off

uncollectible invoices as bad debt?

Don’t miss out on these deductions!


Mistake 2: Forgetting to give credit where credit is due


Your small business is eligible for tax credits.

For example, you can claim your input tax credits for GST/HST paid on goods and services used in making

taxable and zero-rated supplies.

If you’re self-employed, claim CPP contribution payable on your income. There are also investment tax credits

available on specific asset purchases.

Forgetting tax credits means money out of your pocket.


Mistake 3: Missing filing deadlines, or not filing at all


Surprisingly, many small business owners fail to file a tax

return or file after the deadline.

Apart from catching some unwanted attention from the

CRA, not filing a tax return means losing out on some

financial benefits. GST/HST tax credit and the Child Tax

Benefit programs are both based on declared net income.

Your tax return also creates the contribution room in your

RRSP. Of course, filing on time means never having to pay

late-filing penalties. And we all hate penalties, don’t we?

And don’t forget, even though the self-employed tax filing deadline is June 15, any amount owing is due April 30 to

avoid interest.


Mistake 4: Commingling personal & business finances


So, you’re at Costco picking up some groceries and you

decide to grab some supplies for the office. You aren’t

likely to pull out one credit card for the bread and milk and another for the paper and printer ink. But, maybe you

should. Keeping your business finances and home

finances separate is very important.

Commingling personal and business finances could lead to overlooking a legitimate business expense or claiming a

personal expense as a business deduction.

In addition to potentially increasing the likelihood of a CRA audit, this “piercing of the corporate veil” makes

protecting your personal assets more difficult.

Just say no to commingling.


Mistake 5: Neglecting to make tax-savvy investments


Taking advantage of tax laws as they pertain to

investments is a great way to save on your tax bill. Most know the benefits of investing in TFSAs and RRSPs but

what about timing the triggering of capital gains and

capital losses of your unsheltered investments to reduce

your overall tax burden.

Did you know that you can deduct interest costs on money

that you borrow to earn business income? Even the investment you make in your home mortgage can be made

into a tax deduction.


Mistake 6: Failing to let family lend a hand


Running a small business requires the support and

understanding of your family. We all know that. But, did

you know that your family can also lend a hand by helping

lower your tax burden?

By putting family members to work — and paying them a

salary — you can reduce your overall family tax burden.

You can also improve your tax situation by income splitting with your spouse. You can invest in a spousal

RRSP, split up to 50% of pension income with your

partner, and even loan money to your spouse (or child) for

investment purposes.

And, invest in your children’s education through an RESP

and earn a government grant of up to $500 each year.


Mistake 7: Ignoring government incentive programs


The Scientific Research and Experimental Development

Program (SR&ED) encourages Canadian businesses to conduct research and development (R&D) by providing

cash refunds and/or tax credits for your R&D expenditures.

The hiring credit for small business gives you relief from

the employer’s share of employment insurance by

crediting up to $1000 on the payroll account, based on the

increase in the employer’s EI premium paid in one year

over those paid the previous year.

The apprenticeship job creation tax credit is a non-refundable tax credit equal to 10% of the eligible salaries

and wages payable to eligible apprentices to a maximum

credit of $2,000 per year for each eligible apprentice.

See, the taxman isn’t so bad after all.


[email protected] 1.855-378-3628

www.fbc.ca @fbcsmallbiztax