Our top-10 tax tips show you how to avoid the Common Tax Mistakes that Small Businesses Make!
# 1 On Our Top 10 Tax Tips – Use a professional
We all know someone who does taxes at their dining room table for family and friends. They are not the persons to entrust with your business taxes. The Income Tax Act, Standards, interpretations, focus areas, and court judgments are constantly developing. As well, CRA focus areas ie targets, change from year to year. Are you being targeted? We work hard to ant works hard to stay on top of these ever changing standards.
# 2 On Our Top 10 Tax Tips – Claim all of the expenses you are entitled to claim.
The Income Tax Act or ITA as we call it, allows for the deduction of all reasonable expenditures to earn income. That means ALL expenses to earn income which are unique for each and every business.
# 3 On Our Top 10 Tax Tips – Do not claim personal expenses where CRA has a very successful record of enforcement.
Along with turning off the email and phone on vacation, turn off your corporate visa and don’t try to expense that family trip to Disney. Travel deductions are a shining light that welcomes CRA and if a vacation is attached to the front or back of a trip, CRA can discount or disallow the entire claim.
# 4 On Our Top 10 Tax Tips – Follow the letter of the law, not the spirit.
In order to have your claims pass an audit, you must claim your expenses as the Income Tax Act and the relevant interpretation bulletins describe. CRA is not required to correct mistakes in application. Mistakes in application will never be decided in your favour. An example we see all the time is business owners deducting a km charge or a flat rent to their sole proprietorship for us of personal assets.
# 5 On Our Top 10 Tax Tips – Do not compare your returns with your neighbours.
The vast majority of casino visitors lose money however most will only tell you of their wins. Every taxpayer’s situation is different. A huge refund may be more a reflection of a low income and a large family or mistakes in calculating instalments. Never assume their situation is similar to your own. Every client and business is unique and your tax return will be equally unique.
# 6 On Our Top 10 Tax Tips – Do not assume you’ll have your day in court.
Court is the most expensive and penultimate step in deciding who’s right in tax matters. The smart money is to get it correct the first time when you complete your tax return. Any hiccups draw unwanted attention and the chips always fall in favour of the house.
# 7 On Our Top 10 Tax Tips – File on time.
Late filing penalties accrue based up on what you owe. Even if you can’t afford to pay right now, file now and avoid penalties of 10-50% of any amounts owing. Leaving it or ignoring it only multiplies your problems. Talk to us about strategies for filing and paying on time.
# 8 On Our Top 10 Tax Tips – Recognize HST collected as the government’s money.
Time and time again we see businesses that have used HST collections to fund the business. HST is money held in trust and the HST folks are the most aggressive of all the auditors and collectors.
# 9 On Our Top 10 Tax Tips – Keep receipts.
Your bank statement or credit card is not sufficient evidence to claim the HST input tax credit; you must have the original receipt with the vendor’s HST number.
# 10 On Our Top 10 Tax Tips – Do not count on a tax miracle.
Wanting or needing a tax miracle puts you at risk of being taken by a charlatan or scheme operator. A good accountant will explain your tax minimization strategy in simple terms that define pros and cons. If the person or techniques feature some sort of alchemy, secrecy or water from wine – run away, don’t walk. We consistently see the work of tax magicians being unwound and taxpayer left holding the bag. The inflated charitable donation was popular in 2010 and CRA denied in 2012. Art and software donation schemes have also been floated and denied. CRA take a very dim view on organizers of non-substantiated tax shelters.
For detailed Business Tips be sure to read our in-depth article on Pickering Business Tips!
I am CPA and Tax Accountant and am available to answer questions from individuals or small business here in Pickering and Durham region, please feel free to contact us!
You can reach us by calling (905)-430-8000 or use our confidential Contact Form or visit us!
James Abbott, CPA and Associates