Don’t let tax season catch you off guard – do a mid year check
Unless you’re a dedicated tax accountant, thinking about business tax liability is probably something you’d rather avoid until the next year-end rolls around. For individuals’ tax returns, year-end is December 31. Subsequently, individuals must file by April 30th. However, if you operate a sole proprietorship or partnership, then year-end is still December 31, but you must file by June 15. But as unattractive as the idea may be, performing a mid-year review could help your business be in better shape next year when the CRA comes calling.
Here are some issues to consider:
Review Income and Adjust Estimated Taxes
If you’re paying too much, you’re paying out money you could be investing in your business; if you’re paying too little, you’ll wind up owing a boatload of interest on April 30th. Now is the time to make adjustments to save your business some cash.
If your idea of keeping track of deductions involves tossing receipts into an old cigar box, mid-year is a good time to change that. Take time RIGHT NOW to sort through receipts and make notes about deductions while your memory is still relatively fresh. Put receipts in folders or scan them into your computer and back them up. Pick up a small notebook for the car so you can record mileage and have a place to keep toll and gas receipts until you get back to the office.
Plan for retirement
If you haven’t set up a retirement plan yet because it just seems like too much effort, consider this: Contributions to a plan can yield significant tax breaks for business owners. Making contributions throughout the year rather than paying a lump sum at the end of the year or when taxes are due means you avoid creating a cash shortage.
Plan Business Expenses
Reviewing your business’ income and profit/loss statement now can help you decide if you should make a big purchase this year or try to delay until next year. It’s also a good time to determine if your business can qualify for a deduction that allows you to deduct the full cost of a capital item rather than depreciating it.
Planning a good tax strategy is one of the advantages of having an experienced tax accountant on your side. In addition to the ideas presented here, your accountant can help identify other areas for potential savings. There’s no time like right now to get started on tax planning for your business. Call Hogg, Shain & Scheck 416-499-3100 today to schedule an appointment with a skilled tax accountant.