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Jun 26 2015

Top tax tips for business owners

gms final logo

  • Sole Proprietors should ensure that funds set aside aside for taxes include an amount for CPP, everyone has to pay CPP . Sole Proprietors pay their CPP at tax time, as opposed to salaried persons who pay theirs each pay period. A good estimate in year 1 is to set aside 25 to 30% of gross revenue to cover income taxes and CPP. After that the payments to be set aside will be determined based on your previous year’s filing
  • File on time, and pay installments on time. This saves on interest and penalties. Penalty is 5% of taxes owing. Ensure you discuss with your accountant your filing deadlines and the implications.
  • Keep business bank account separate from personal bank account.
  • Provide invoices for all work done and keep record of actual receipts for expenses incurred
  • Remember to maintain a mileage log – for shareholders, you can be paid mileage tax free from the corporation, as opposed to sole proprietors where the total mileage travelled is apportioned and then used as a deduction in calculating your taxes. In either case, a mileage log is important
  • HST input tax credit can be claimed on home office expenses and mileage reimbursements
  • Designate one credit card for business expenses (even if it is one you got in your name). That way the interest can be claimed easily
  • Wait until you have are just about to reach $30,000 in sales before you get a HST number. Once you have the HST number , you must start collecting taxes, and if your register too early, this might push forward a lot of administration that you didn’t bargin for
  • When signing up for HST, please ensure that the reporting period lines up with your business fiscal year. This makes record keeping much easier. So if your fiscal year end is Dec 31, then your HST should be Dec 31 st as well, or if quarterly, it should be calendar quarters, so that it will line up with the fiscal year end and recordkeeping
  • Ask your accountant if you qualify for using the Quick method to prepare your HST returns
  • Stay on top of your recordkeeping
  • Ensure you discuss the various compensation structure options (and implications) available to you as the business owner, with your accountant
  • Compensation via dividend is treated as investment income (as opposed to earned income), as such no CPP, EI, or health tax is payable on these. This compensation method can therefore result in good tax savings, however, the taxpayer will have no contributions to the CPP.

CRA Audit triggers (personal and business taxes)

 

  • Small business losses for more than 3 years
  • Specific targeted industries, which change from time to time – CRA is currently focussing on cash based businesses (eg., restaurants and tradespersons) and the underground economy, where money is passed “under the table”.
  • Certain personal tax deductions are often scrutinized – Moving expenses, tuition transfers, large medical expense claims, childcare expenses and donation receipts

Green Meikle & Smith Chartered Professional Accountants

Authorized to practice public accounting by the Chartered Professional Accountants of Ontario

 

1020 Matheson Blvd. E. Unit 10

Mississauga, ON L4W 4J9

905-919-3543 Ext 101

647-338-5306 (cell)

www.greenmeiklesmith.com

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Written by Dwania Peele · Categorized: Green Meikle & Smith · Tagged: bank account, business expenses, business owner, Canadian Small Business Women, compensation, CPP, CRA, credit card, deductions, economy, EI, Green Meikle and Smith, gross revenue, HST, income taxes, Investment, invoices, penalty, personal bank account, salary, Sole Proprietors, tax, tax credit, tax deductions, tax tips

Nov 25 2014

Know your Numbers!

Uchechi

Most people that know me well know that I love looking at numbers. I love creating budgets and expense tracking sheets to manage both my personal and business expenses. I love to look at how my business makes money and look at different opportunities to bring in additional sources of revenues into my business. However, I find most business owners do not do this.

How does your business make money? Yes, you may have a product or service that you sell, but there are so many different areas to consider in terms of how you make money. Who are your strongest consumers, and which outlets do you make the most money in? How profitable is your business? You’ve got to understand the financial health of your business.

It’s unfortunate, but finances tend to be where most small business owners tend to fall short. Entrepreneurs are highly creative, and there’s so much we have on the go, and sometimes the numbers part is what we tend to look at last. However, I’m a firm believer that you really need to look at your numbers and understand your numbers on a consistent basis. Understanding your finances allows you to make the right business decisions, know how healthy your business is, and will help you build a business with longevity.

Take time to sit down and add all the numbers. Do not be afraid of the numbers. When you’re afraid of the number, and ignore them, that’s when you get yourself into trouble. Set an annual (yearly) target and break it down into monthly and weekly targets. Depending on how big your business is, you may want to start with monthly, but I really love breaking it down into weekly.

When you do your budget, don’t forget to take account your own basic needs. Some business owners tend to budget solely on their business expenses. That’s great if you have a full-time job and you’re bridging your business. However, if you want your business to sustain you and you want to run it full-time, you really need to take your personal expenses into account.

You also need to also understand your break-even point. Your break-even point is the point where revenue actually starts to cover your expenses. The more money you make on top of that will go into your profitability.

Start tracking the return on all those activities you’re doing. So, if it’s Facebook marketing, your email newsletter– how are those converting? You need to know how much money you’re getting in return for all the money you’re spending to bring in sales.

Taxes are another great thing to consider. A lot of small business owners miss this completely, and I’ve been guilty of this too in the past. What tends to happen is we forget to set money aside for taxes. But once you do your taxes, especially when you start making more profit, you’ll have to pay taxes, and depending on how much profit you made, you may get a big tax bill. If you have not been setting any money aside for it, it will leave you scrambling to get money to pay for the taxes. Furthermore, it will cause you so much stress and energy. It will also take the focus from running your business to worrying about finances. Always set some money aside, especially if you’re making profit to pay for your taxes.

There’s so much I can write about this, and feel it’s so important to the success of your business that I dedicated a whole module in my 4-Week Business Success Bootcamp online program to ‘Know your Numbers’.

I like to say, ‘your numbers tells you a story’.  That story will show you how healthy your business is and areas you need to improve to make it more successful!

 

Uchechi Ezurike-Bosse is a Business & Lifestyle Strategist, Speaker and Writer, but most importantly, a proud Mother and Wife. Uchechi is Founder of My Empowered Living (http://www.myempoweredliving.com) a website aimed at helping women shift their mindset and live their passion! Whether it’s starting and building their dream business, or helping them create a lifestyle they crave, Uchechi is the modern woman’s secret to success! Visit Uchechi at www.myempoweredliving.com to get her FREE online video training series The 4 Keys to your Business Success! This free 4-day business training reveals her 4 key strategies needed to build a profitable and successful business, and how to put them to work in your business!

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Written by Dwania Peele · Categorized: Uchechi Ezurike-Bosse · Tagged: bootcamp, business, business development, business expense, business expenses, business owners, business success, Business Woman, Canadian Small Business Women, consumers, entrepreneur, expense sheets, Facebook, Know Your Numbers, moneyservice, My Empowered Living, numbers, personal expense, sell, small business development, small business owners, taxes, Uchechi Ezurike-Bosse

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