As the end of the year draws nigh, it is time for business owners everywhere to start contemplating some end of year tax planning tips to not only ensure that they can maximize their tax deductions and reduce taxes payable, but to streamline the tax filing process in the New Year. Even if you are incorporated and your year end date is not December 31st, it is a good time to take advantage of calendar year deadlines for personal tax planning purposes.
Organize & File – While not necessarily a direct method for saving taxes, ensuring that you have all your proverbial ducks in a row is the starting point for efficient tax planning. Many small business save all of their bookkeeping/revenue and expense tracking right to the end, which often results in missed deductions and higher taxes (not to mention unnecessary stress). Reviewing government correspondence can be especially beneficial particularly if there are some interest or penalties that are due and accumulating or if there has been a change in some reporting deadlines. Even if you are not sure what is what (a common problem for business owners specifically when looking at government correspondence) keep everything in a file to present to your accountant, who should be able to provide valuable guidance on how to interpret these cryptic notices.
Make Instalment Payments – Many business owners ignore instalment payment notices and then are hit with large amounts of interest (Revenue Quebec can be particularly punitive) which can be easily avoided by making quarterly instalments of GST/HST/QST , corporation tax and personal income taxes. Information on instalments can be found on your tax return as well as via letters that both Revenue Canada and Revenue Quebec will send. Failing that you can speak to your accountant, call the Revenue Agencies or sign up for online services that will allow you to see the status of your accounts.
Advance Purchases of Supplies and Capital Assets – If you are planning , for example, to buy a computer, a more ergonomically structured office chair or need some office supplies, and your year-end falls on December 31st , it might make sense to make these purchases before the year end (cash flow permitting) to take advantage of the expense deduction. Note that high value items like chairs and computers are considered to be capital assets which cannot be fully expensed in one year, however you will get the depreciation deduction regardless of when you purchase it in the year.
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