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To avoid financial penalties, small business owners in Canada need to be aware of how to properly file taxes. Below are some of the most common tax questions that small business owners ask our accountants.
1. Will the structure of my business affect the way I file taxes?
Yes, how you file taxes will be influenced by your business’ legal structure
2. Why do I need a business number?
3. Do I need to register for a GST/HST number?
4. How much of my income will go to taxes?
In Canada, small unincorporated business owners are subject to personal marginal tax rates on their net income. The maximum personal tax rate for 2014 is 49.41% in Ontario. Small incorporated businesses are subject to tax in Ontario at the rate of 15.5% on the first $500,000 of taxable income.
5. Will I have to pay into the Canada Pension Plan (CPP)?
Once your unincorporated business generates more than $3,500, you will need to pay double the amount into the CPP as you would have as an employee
6. If I work from home, can I expense my mortgage?
If you conduct the majority of your business from home (e.g. meeting clients) you may expense a portion of your mortgage (interest only)
7. How should I claim business mileage?
8. Do I need receipts to file taxes?
Yes, keep a thorough paper trail in case you need to justify your expenditures to Revenue Canada (CRA)
9. What if I disagree with my CRA notice?
You may file an objection
10. What happens when my business has losses?
Losses of your unincorporated business offsets your other income
Successfully filing taxes for your small business is a complex process to “solve” in ten simple questions. If you want an in-depth understanding regarding your tax situation, contact our accounting firm in Toronto, Ontario.