Small Business Owners: Are You Taking Advantage of Every Tax Credit?

No one likes filing their taxes, but it can be even more overwhelming with a small business. With the last-minute scramble every spring and receipts in every nook and cranny, your taxes might not always be perfect. Unless you’re an accountant, knowing the ins and outs of small business taxes isn’t easy. Here are six tips to make sure you’re not overlooking any credits that can make or break your small business.

1. Expenses

Accurately tracking and claiming expenses are absolutely crucial for a small business. Even small expenses can add up by tax season, and that can make a huge difference for your business. Make sure you know what can (and can’t) be claimed as a business expense. Office supplies, maintenance and repairs, some advertising, and even business licenses and dues can be claimed as valid operating expenses.

2. Input Tax Credits

Input Tax Credits help you recover some of the GST/HST paid out on business expenses. Most small business owners simply don’t take advantage of this, but it can mean serious savings come tax season. If your business has a registered GST number, you’re eligible to reclaim the GST/HST paid on most valid business expenses. When combined with the last tip, this can make the cost of running your business a lot more manageable.

3. Health Plans

Good news: you don’t have to forego health insurance to run your own business. If you’re self-employed, you can deduct the premiums you pay for private health care plans for you and your household. Health plans aren’t cheap, so this is one way to maximize your profit (or at least reduce your spend) every year.

4. Home Business

If you have a valid home office, you definitely need to be claiming it on your taxes. A home office comes with tax write-offs galore, like being able to claim a portion of your rent/mortgage and utilities. It might take a little bit of math, but it’s well worth the effort every year.

5. Deadline

It shouldn’t have to be said, but every year businesses miss the filing deadline and make everything harder for themselves. You start racking up penalty charges every month that you’re late, which could make next year’s taxes even harder. Keep yourself organized, set a deadline, and make it happen. After all, there are only two guaranteed things in life, so procrastinating won’t get you anywhere.

6. Audit

No one wants to be audited when it comes to complex business taxes, but it happens more than you think. Being prepared will make you dread tax season a lot less. Keep all the receipts you need in a filing cabinet and use a spreadsheet to track expenses so you don’t forget any. Don’t forget to keep everything for up to six years in case of a future audit.

Remember: the best defense is always a good offense. If you do a little legwork off-the-hop, you can save yourself a lot of stress, and even more money. Contact me if you want to make sure you’re prepared for this coming tax season.

How to Maximize Your Return: Self-Employment Taxes Made Simple

Being self-employed isn’t easy, and sometimes every dollar counts. Tax season can be particularly stressful, but there are bona fide ways to make sure you’re getting the best return possible on your self-employment taxes so that you can breathe a little easier every spring. Keep reading to find out all of the expenses your business is likely entitled to, so that this year’s self-employment taxes are smooth sailing.

1. Business Expenses

When you’re self-employed, everything you put into running your business is essentially a business expense and can likely be written off. While it might not seem like a big deal to claim your printer paper on your self-employment taxes, these can add up to a serious tax return that can help your business thrive long term. Business operating expenses can include some forms of advertising, office supplies, legal and accounting fees, licenses for your business, insurance premiums, and more. Essentially everything you spend money on to make money should be looked at to see if it can be claimed.

2. Office Expenses

Your home office is a goldmine when it comes to your tax return, and many self-employed people simply aren’t taking advantage of what they are due. Working from home can save you money, but it can also help bump up your tax return this spring. Make sure you’re properly calculating the space you can claim, and don’t forget to include a portion of your utilities, rent/mortgage, and any applicable repairs or maintenance. On top of that, your capital costs like desks, chairs, and filing cabinets are also eligible to claim, so make sure you keep your receipts.

3. Travel Expenses

Being self-employed can mean a ton of travel, which is often overlooked. Everything from flights to conference costs, cabs to meals on the road, and even entertaining clients can be partially or completely claimed. If you use your vehicle for your business, that’s likely a business expense you can claim on your self-employment taxes too, including gas, insurance, and maintenance.

4. Overlooked Expenses

Maximizing your precious tax return is all about making sure you’re not overlooking anything you might be genuinely able to claim. These smaller, often missed expenses can add up to an important amount of money for your business. Examples include the cost of business cheques, health plans for your employees, a cleaning service for your home office, association dues, business loan interest (to certain limits), business vehicle license and registration fees, parking fees for business purposes, and more. Working with an accountant can help make sure you don’t miss any legitimate expenses that you can claim, so that your return is the best it can be every year.

If you want to get the most back at tax time — or at least pay the smallest amount out — contact me today. It’s never too early to start planning for a less stressful tax season.

Everything You Need to Know About Small Business GST Payments

Running a small business in Canada is tough. In fact, it’s so tough that 8 out of 10 businesses fail within the first 18 months. So any measures you can take to help your business succeed should be welcomed with wide open arms, and the GST credit is no exception. If you haven’t heard of it, it’s time you find out: businesses can claim back the GST/HST paid on business and operating expenses come tax season, and that can add up to a lot more than chump change. Read on to find out exactly how to get this money back, because your business deserves every leg up it’s entitled to.

1. Eligibility

If you’re a business with a registered GST number, you’re eligible to claim the GST/HST paid on business supplies. This includes everything from desks to paper, which can add up for many businesses. Getting registered for a GST number right from the get-go is a smart idea. You’ll be able to claim back the tax on all the many purchases you’ll need to make when starting up. Claiming back the GST/HST is simple: just enter the amount you’ve paid under Input Tax Credits (ITCs). Next. input the amount of GST/HST collected from customers throughout the year and then deduct the ITC amount. If you end up with a negative number, then kudos to you, you’re eligible for a refund.

2. Deadline

It’s a good rule of thumb to claim your ITCs in the tax season right after the expenses were purchased. This will help keep you organized and ensure you’re maxing out your refunds whenever possible. But sometimes life happens or maybe you just found out about the GST/HST credit.

The good news is that you have up to four years after the claim should have been made to still claim the tax — unless your business had a revenue of more than six million dollars in each of the last two fiscal years. If so, you would have to claim the GST/HST within just two years of the end of the reporting period during which you made the business purchase. The point is, there’s leniency if you forget, which can be a saving grace for hectic business owners.

3. Receipts

Keeping receipts for any tax information is crucial, and a GST/HST refund is no exception. The last thing you want is an audit, so ensure you keep receipts up to four years after you submit. Find tips for storing your receipts and staying organized here.

4. Quick Method

If you don’t normally get a refund of your GST/HST payments, the Quick Method might be for you. It was created to help save smaller business time and money, and can make tax season a little less painful. With the Quick Method, you may be able to pay back a smaller portion of the tax received from customers. This is much easier than adding up all the GST/HST collected and then subtracting the tax paid on expenses. If you have minimal business expenses, this can make filing your taxes a lot simpler.

Find out everything you need to know about the Quick Method here. And remember: if you are at all uncertain about anything, contact me. It’s easier to get yourself in order from the start, than to go back and fix mistakes.

Working from Home: Are You Eligible for a Tax Break?

With more of a focus on work-life balance than ever, more and more people are either working from home or running their business from a home office, but most people don’t know that they could be eligible to claim this workspace on their taxes. Whether you’re self-employed, you work remotely, or your employer requires you to have a home office, you might be able to claim the costs of this home office on your taxes for significant savings. From rent to cleaning costs, your home office expenses could become write-offs and make tax season a little less painful. Find out everything you need to know below so that your workspace in the home is less of a liability, and more of a tool to help your business grow.

1. Home Office

If you’re self-employed or work out of your home, you’re likely entitled to claim a portion of your rent or mortgage on your taxes. This can mean serious tax savings for you, but there are a few caveats: your home office has to be your principal place of business or used for the sole purpose of business (which means that the kitchen table where you sometimes set up your laptop doesn’t quite count), or the space must be used on a regular basis for meeting clients or patients. If you fall into any of these categories, you can claim part of your rent or mortgage. The amount you claim depends on the size of your home office; if it takes up 10% of your home, you can claim 10% of the mortgage (math made easy!). Check here for a detailed calculation method.

2. Expenses

In addition to your rent or mortgage, you’re also entitled to claim valid expenses that go along with having an office in your home. For example, your home office likely uses internet, electricity, water, and more, which means you can claim a portion of those on your taxes. The same proportion rule applies here: if your office takes up 10% of the space in your home, you can claim 10% of the utilities. Regular business expenses like pens, stationery, and stamps can also be claimed, but not capital expenses like desk chairs, desks, or other furniture. Don’t feel like cleaning? A cleaning service for your home office is indeed deductible, so you can do a little less dusting and a little more business.

3. Common Mistakes

There are a ton of common mistakes when filing for home-office expenses, which is why it’s a hot spot for CRA audits. If you can, consult an accountant to make sure you’re crossing your T’s and dotting your I’s, because being audited for your home-office expenses can cause the CRA to audit all of your other claims as well and that’s a hassle no one wants. Some common mistakes are claiming your full mortgage instead of just a portion (a number that big is an immediate red flag) or inflating the size of your home office. While repairs in your home office are definitely eligible, make sure you’re not claiming a family bathroom renovation, or your entire tax claim could be denied. Another mistake is using expenses to create a business loss; if your expenses are more than your net income, you can carry them over to the next year but you can’t use them to take a loss this year.

Taking the time to ensure your taxes are done right the first time around can save you months of hassle, stress, and a potentially crippling tax payment. If you’re sweating just reading this, then it’s probably time for you and I to have a talk. Contact me, and we’ll make sure you’re making the right decisions for your at-home business.

Contractors Beware if CRA Declares You a Personal Services Business

So you’ve gone out on your own and created a small business that you can be proud of. Kudos to you. But what you might not realize is that at any time, the Canada Revenue Agency could take that away by declaring you a personal services business instead of a small business, and this kind of hit isn’t easy to recover from. A personal services business is simply a business that performs services for a company that would usually be performed by an employee of that company itself, but it can mean a world of difference in the eyes of the CRA.

Read on for tax advice that shows exactly why you want to avoid being labeled a personal services business, and what you can do to avoid it to protect you and your business.

1. Employee Relationship

One of the hallmarks of a personal services business is acting like an employee to the company you are providing a service. If the company tells you what to do and how to do it or provides training, chances are you’ll be considered an employee in the eyes of the CRA. But if you pick and choose what work you do and decide how that work is performed, then you have more of a business relationship that the CRA will have a tough time disputing. Either way, expanding your business to service more clients will give you more of a leg to stand on should the CRA come knocking at your door, which is not only smart tax advice but also just good business sense.

2. Small Business Deduction

One of the worst side effects of being labeled a personal services business? Losing the small business tax deduction. Any tax advice guru worth their salt will tell you how valuable this deduction is. It gives small businesses a tax break on the first $500,000 of business income, but this reduced tax rate isn’t given to personal services businesses because they’re considered an incorporated employee. They pay the full tax on their entire income, which can make a significant difference for smaller operations.

3. Other Tax Deductions

Another issue with being labeled a personal services business is that you’re not allowed to claim business expenses like other companies. This means that genuine business costs like supplies, office space, and more can’t be written off and instead come straight out of your business income, which can make a huge difference for smaller businesses.

4. Possible Reassessment

You might have been a small business for years, but at any time the CRA could declare you a personal services business and this could apply retroactively, which is just as dire as it sounds. This could mean a reassessment and a devastating tax bill because of misfiling your taxes for years and claiming the small business Deduction as well as expenses.

For some businesses, this sudden bill could prove crippling, which makes it more important than ever to avoid being declared a personal services business and getting legitimate tax advice. Get more small business tax advice by contacting me. Keeping you in the green, and out of the red is my business.


How to Make New Year’s Resolutions a Reality for your Business

Do you remember last year’s New Year’s Resolution? If you can’t, that’s ok. I suspect very few of us can. Studies have shown that New Year’s Resolutions don’t really work. Everyone always enters January with high hopes, but then they’re usually dashed by February. Why is that so often the case?

Most New Year’s Resolutions don’t succeed because they aren’t really achievable goals. They’re more like wishes. For example, “I’m going to lose weight this year” usually really means “I wish that I would lose some weight.” A wish isn’t realistic unless it’s accompanied by a plan.

The key to setting achievable Resolutions is to have both a specific goal and a method set out. Instead of just saying that you want to get in shape, a better Resolution would be to go to the gym every Wednesday morning. Setting a specific task provides you with parameters that give motivate to reach an outcome.

With that said, here are some excellent New Year’s Resolutions for business owners and entrepreneurs, and some concrete suggestions of how you can achieve them:

Wish: Get More Customers

Method: Redefine Your Social Media Marketing Presence

Even if you have a solid social media presence online, the new year is a great time to reevaluate and figure out what’s working and what isn’t.

What kind of follower interactions are you getting on Facebook? Is your company Tweeting daily? Are you networking with new professionals on LinkedIn? Are your blog posts driving traffic? What kinds of content is getting the most engagement? By boosting your social media presence, you’ll be able to reach many more customers and readily engage with the ones you already have.

Some great ways to get your company out there are to start a monthly newsletter or ezine, write weekly blog posts that you can promote on Twitter, Facebook, and LinkedIn, and readily follow other industry professionals on social media platforms to see what they’re up to. The internet is the best and most inexpensive marketing tool at your disposal. Try one of these three suggestions and monitor the response from your customers. I bet it will be positive!

Wish: Establish Yourself as an Industry Expert

Method: Learn More About Your Industry

Learning is the hallmark of success. It was true back when you were in school and it’s just as true now.

Learning more about your industry can only be a good thing. It automatically puts you leaps and bounds ahead of your competitors, who, odds are, aren’t going out of their way to learn anything new. By resolving to go to a conference, read more books, or just check out some great business blogs online, you can expand your knowledge of your business and get an edge over your competitors.

Of course, saying “I’m going to read more books” is easy, but actually reading them is more challenging. Pick a few specific titles that you want to read over the next year and put them on your nightside table. This will greatly increase the odds that you’ll pick one up.

Learning is a lifelong process, so make the upcoming year the one where you double down on your studies!

Wish: Grow Your Business

Method: Plan Ahead for the Coming Year

Do you have a written-out business plan for the future? If not, you should create one. Having a written out plan for the new year, with measurable targets and goals, can really help you keep on track. A yearly business plan should also not be set in stone. It should be malleable, and able to change with market realities and shifts throughout the coming year.

Write your business plan on your computer and then print off a copy. Keep it somewhere accessible in your desk drawer or a nearby filing cabinet so that you can make notes when you have any new ideas or thoughts. Every month, update the plan on your computer with the notes you’ve taken to keep it current.

Your business plan shouldn’t just be focused on what you want to do, it should also lay out some of the potential dangers and obstacles that might lie ahead. Having a plan to deal with these issues means that you’ll be prepared to quickly address challenges if they arise in the coming year.

Wish: Find A Healthy Work/Life Balance

Method: Block Off Personal Time In Your Calendar

A healthy work/life balance is about more than just leisure time. Your life outside of work is what refuels your heart and soul. Spending time with your family and friends reminds you why you do what you do.

Make personal time a priority in your calendar. Try to set up a weekly dinner or get together with friends, and keep it in your schedule. A good work/life balance can help to keep you healthy. Book regular visits to the gym in your calendar, or block off time for whatever your preferred form of exercise may be. Whether it’s a run, a dance class, or roller derby, regular exercise can help keep your body healthy, your mind alert, and your motivation alive.

Finding the proper balance between your time at the office and time away can require some give and take, and trial and error. Once you find it, you’ll discover that one will compliment the other! It’s a worthy goal for the new year.

Wish: Be Successful

Method: Rediscover Why You Love Doing What You Do

Every now and then, we lose track of why we do what we do. Work can become just that: work. The advent of the new year is the perfect opportunity to remind yourself why you started your own business in the first place.

Rediscover your love for your industry by doing the tasks you love more often. Being an entrepreneur isn’t easy, so why do it if you don’t enjoy something about it? Find that special something again, write it down, and look at it every now and then to remind yourself how much you love to do what you do. It will help you to redefine your vision of success.

The Heart of Resolutions

Of course, all of these suggestions are things that you should be doing all year round, not just in January! But the new year does provide a useful benchmark and a chance to reorient yourself.

Most of the time, achieving your goals is a matter of time. Specifically, not having enough time! A surefire way to achieve many of these Resolutions is to hire a Virtual Assistant to help you out so that you’re more available to take care of the things that are most important. A great VA can help you to maintain your internet presence, optimize your daily schedule, and just get all of the little annoying tasks out of the way so that you can remember why you loved your business enough to start it in the first place!

Please feel free to give me a call to discuss how I can make your life and business easier in the new year.