Simple Tax Tips for Small Business Owners
As a business owner, there are several facets to consider when approaching your taxes. Creating the optimum tax situation for yourself requires some research and attention to the details. Even if it isn’t tax season, it is important to look ahead and prepare in various ways.
Firstly, it is imperative to keep a detailed record of your business finances. This means keeping track of all the money that flows in and out of your company.
Even before your business is creating an income, remember to keep every receipt for every expense for a minimum of seven years. This will save you huge headaches down the road if your small business ever gets audited. Keeping a detailed record of your finances will not only be helpful for tax purposes, but will also help you stay organized and track income trends and patterns over time.
Secondly, know which receipts to keep. Find out what expenses are eligible for tax deductions. For example, if you own and use a vehicle for business purposes, such as driving to meetings or work sites, keep track of your mileage use and gas receipts.
Do you spend money on materials and supplies for your small business? Keep a record of those transactions as well. There are many costs that are considered small business tax write-offs.
Make sure to use common sense and be reasonable about the expenses you claim for deductions. All the costs you claim must be directly associated with your business and its needs.
Thirdly, do some research on small business tax credits. Certain businesses are eligible for receiving a tax credit because of how they operate as a company.
Does your small business employ co-op students or apprentices? Does your business specialize in creating innovative products or services? Do you conduct research? Is your company involved in making political contributions or donations to non-profit organizations?
Fourthly, take into consideration hiring a professional and reputable accountant. There are many firms in Canada that specialize in small business tax return preparation. They will have the knowhow to provide your business with the best advice on optimizing business tax deductions, write-offs and credits.
Fifthly, consider paying your taxes frequently throughout the year instead of once annually. If you operate this way, you can avoid loosing track of records.
Small monthly payments are easier to make, especially if you struggle with budgeting or don’t have the funds for a large payment at the end of the tax year. Additionally, you can simplify this process by setting up automatic payments online.
Remember that preparing your small business for completing your taxes correctly is a year-round task, even if you have an accountant.
Be consistent with doing research on what your business is eligible for when it pertains to taxes. Tax deductions and credits are constantly being added and removed.
Don’t forget to keep consistent and detailed records of all your business dealings. It will pay off, quite literally, in the short and long run.
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