As tax season approaches every year, it always seems to hit us at the busiest time in our personal and professional lives. Although most private businesses in Canada face the same tax-preparation issues year after year, this doesn’t have to be the case.
Here are some key things you can do to stay organized on the tax side of your business:
Keep your documents accessible. It’s important to incorporate a system for organizing all of the receipts and paperwork you’ll need for filing your taxes or to provide to your tax professional. These documents may include your previous tax returns, financial statements, receipts from charitable donations, and a detailed mileage and logbook if you’re claiming your vehicle and records of food and entertainment expenses.
For most people, organizing documents and receipts isn’t the most fun aspect of being a private business owner. However, you can simplify your life around tax time if you implement a system that works for you. For some business owners, it’s best to put aside 15 minutes every day to organize, scan and file their documents. For others, they may only be able to do it once a month. Whichever option you choose, be sure to stick to the schedule and you won’t have to scramble when it comes to tax time.
If you’re an annual HST filer, you can recover the HST paid by claiming input tax credits (ITCs) on your HST return. To ensure that your claim will be allowed, you need to ensure you have accurate documentation and records in case your claim is challenged.
Claim any eligible deductions. Look ahead to potential deductions and credits you may want to take advantage of at tax time. Rather than struggle to come up with the capital to make a large charitable donation in December or to make a last-minute Registered Retirement Savings Plan (RRSP) or Tax Free Savings Account (TFSA) contribution, divide your obligations and pay a portion each month.
Review your outstanding debt to ensure that you make your interest expense deductible to the maximum extent possible. Debt is only deductible if it was used to earn business or property income. It is always wise to pay off non-deductible debt as quickly as possible.
Ensure your accounting software is the right fit for the business.
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