Ten Tips to be a Tax Savvy Small or Medium Enterprise
Proper accounting practices can make or break a growing business. Business owners need to be aware of current government regulations when filing their taxes. From expense management and deductions to maintaining proper documentation, working out how taxes will affect your business is integral to your success.
Here are ten tips that will add value to your business accounting management. Keep in mind that tips are just tips and cannot replace the knowledge that comes from consulting a professional.
- Employee payroll taxes: Remember that payroll withholdings apply to annual income, commission and bonuses. Also always keep employee records on file for future reference.
- Expenses: Your business can deduct any reasonable expenses, but make sure employees are accountable in their spending by keeping thorough records. A reasonable expense can be qualified as one that was used to generate income.
- Lucrative credits: There is a variety of substantial credits that can be claimed based on the type of business you own and what you do. Consult with a professional to help maximize on what deductions can be claimed.
- Charitable contributions: Make sure you keep track of all charitable donations. To find a full list of charities recognized by the CRA, visit here.
- Tax documents: It is good practice to keep all tax-related documents such as receipts and employee records. A good rule of thumb is to keep all official documents for at least seven years.
- Deadlines: Understand if your company is filing taxes within a calendar-year, a non calendar-year or fiscal period. There will be different deadlines associated to each of these categories. For example, a fiscal period cannot be longer than 53 weeks and a business has to file its tax return within six months of the end of its fiscal period – with no exceptions.
- Claims: Remember to keep your personal and business expenses separate. If you cannot justify the spending on your business, do not to claim it.
- Tax audits: Unfortunately these are a reality for many businesses. The CRA may require you to be audited at your place of business (field audit) or just submit specific documents (correspondence audit). Regardless of which, when asked, do not delay as this will lead to unnecessary complications.
- Sales taxes: Companies are subjected to sales taxes (in accordance with federal and provincial guidelines), depending on the product or service provided. Products have very few exceptions while services are typically exempt, but this needs to be confirmed before filing.
- Maintain a transparent relationship with the CRA: The CRA works to reduce fraud and maintains the publics’ confidence. The best way to avoid complications related to filing is to always make sure all documents are properly accounted for.
Having a clear understanding of the above topics, as well as a professional expert who can offer their knowledge and experience, will be what helps your SMB be more efficient and alleviate unnecessary stress time spent on your tax filings.
For more tips related to owning your own business and the financial health of your company visit Ed’s blog.