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How to Stay Ahead of the CRA

accounting

Small business owners and the self-employed start every year from groups like the semi-retired, up-and-coming entrepreneurs and those just wanting to follow their dreams. As you start down the road, don’t make the mistake of not staying in line with the Canada Revenue Agency (CRA).

Here are some important tips to follow:

Keeping the Small in Small Business

While small businesses are usually thought of as privately held, the CRA looks at them in a more detailed fashion. In Ontario, they are normally eligible for the lowest tax rates on the first $500,000 of taxable income.

If an expense is needed to conduct business, you can deduct it

The CRA may not always agree with expenses business owners think are “business-related.” For the most part, if you need to purchase a service or product to earn income, the costs associated with it can be deducted from the revenue of the business. You should be aware that some capital outlays which you feel are needed may not be deductible right away.

Employee or self-employed?

The CRA looks upon small business owners and self-employed as one and the same when it comes to allowable business expense deductions. As I wrote about earlier, the important difference between an employee and a self-employed person is that, apart from a few exceptions,  nothing is deductible against employment income.  Self-employed people and business owners generally find the reverse. With the exception of some specific tax rules, most expenses are deductible.

Start Right, End Right

Proper planning may reduce the amount of tax you have to pay each year. Involve a Chartered Professional Accountant from the very beginning, and by doing so, you may benefit from opportunities that you might not be familiar with. Business structure, tax deferrals, income splitting, tax credits are some, to name but a few. Other necessary steps such as registering your business, creating the CRA accounts for HST and payroll, and establishing proper and confidential record-keeping processes are steps a Chartered Professional Accountant can assist with.

Make the most of the calendar

Incorporated businesses can choose a fiscal year-end date that is convenient to their needs. Golf courses like October as that time of year is traditionally the end of one season and the start of the next. Other seasonal businesses may find that spring is the best time. By selecting the right date, you can arrange it, so you have the money when payments are due.

Hire the skills and technology you need

Expert advice and the most current technology can save what you pay for it, often many times over. If paperwork is not your thing, hire a bookkeeper. This person could save you hours and money by keeping your accounts up to date. Last but not least, find a Chartered Professional Accountant in relatively close proximity to your location. It will make it easier to meet whenever the need arises.

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Sunday, 25 February 2024