This time of year means snow, holidays, family and presents but for the wise businessperson, it also signals tax prep time. Yes, we know it’s less fun than yule logs and eggnog, but starting early means more time to prepare and less last-minute rushing.
Here are five early prep tax tips for businesspeople.
Tip 1: Choose Your Support Team
There are a few routes you can take when preparing your tax return, most notably, do you prepare them yourself or do you hire a professional? This decision will depend on your comfort level, but we can tell you that changes are frequent in tax law, especially during Covid, and a professional is generally better positioned to make sure you are up to date with what can and cannot be claimed as expenses, what to do if your business benefited from government subsidies, and all the other rules and regulations.
A legal professional can incorporate your company, advise you on various contributions, and if you are audited, we can help there, too. Our affordable business plans are perfect for tax season because you can speak to a lawyer when you need to.
Tip 2: What Kind of Return Do You Need?
As you will know if you have been in business for more than a year, every company in Canada must file a tax return annually. What kind of return depends on the legal structure of your business. For example, if you are self-employed there are different forms to fill out than if you are incorporated. Same is true for your filing deadline: The date your forms must be filed and the date your taxes are due (if you owe money) will also depend on the legal structure of your business.
Tip 3: Organize Your Paperwork
When we say organize your paperwork, we do not mean shoving things into a folder (a real one) or a virtual one and hope they will sort themselves out. Trust us. They will not. There is some decent software out there to help you organize your receipts and hopefully, you are on top of your books, which is very important—whether you do your own taxes or you ask a professional to help. Collect receipts, keep them organized. If you are working from home, keep every bill related to your business.
Tip 4: Go Online, Do Your Homework
The majority of Canadians file electronically and this is strongly advised because if you’re owed money, you will receive it faster. And while we are on this topic, sign up for everything electronic, if it’s available to you: direct deposit, register your business online, use My (Business) Account, and so on. Also, take some time to familiarize yourself with the tax process. This will make the process so much easier. You will know what questions to ask a professional and gives you more control and knowledge. Check out webinars like these from Revenue Canada.
Tip 5: Be Honest!
This sounds like an obvious tip but don’t lie! There are those who make a living out of spreading false information about not paying taxes, such as tax protesting and other schemes that will not likely end well for you. Oh, and lying on your tax returns is illegal. You can be fined. A lot. And you can be jailed, get a criminal record which may prevent you from doing certain things down the road, and in the end, you will still have to pay what is owed!
The Takeaway
Federal taxes, provincial taxes, consumption taxes, expenses, credits… it will not surprise anyone that taxes can be complicated. Whether you are an experienced business person or new to business, the best approach to take is to be prepared and consult competent professionals. Join the more than 4,400,000 people already protected by LegalShield and sign up today!
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