If you’re a small-business owner, there are some important items you’ll need to be aware of when it comes to income tax in Canada. It’s not always business as usual when it comes to tax time. For this reason, it’ll be important to have a tax accountant on your side that understands everything there is to know about how to save you money when tax time arrives. Below you’re going to discover the 5 things you need to know about income tax in Canada:
The information provided here will give you a better understanding about some of the deductions you can take as well as some things you’ll need to avoid when it comes to tax time. After you’ve had a chance to read the information below, you’ll have a better understanding as to why a tax accountant will be an important asset when it comes time to file taxes.
1.) Submitting Your Tax Returns on Time or before the Deadline
One of the most important items you’ll need to understand about tax time in Canada will be to submit your tax returns on time or before the deadline. Whether you own a small business or a larger business, if you do not submit your taxes by the due date, you could be penalized up to 5%. In addition, if you are late in reoccurring months, you could be charged an additional 1% for each month you don’t submit your tax statement. One more thing, it’s important to understand that the CRA does charge a 4% interest penalty. So you will want to make sure that you submit your tax returns on time.
2.) Using Tax-Free Savings Accounts
When saving money, use a TFSA or tax-free savings account. This money can be used for shares, bonds, mutual funds, or investments. This will be mainly used for a tax minimizing process because any of the prophets you gain from your investments will not be subject to any income tax. In addition, withdrawals are not taxable as well.
3.) Utilizing Home Office Expenses
If you are a small-business owner and you work in a home office, you will have the opportunity of utilizing home office expenses. Property taxes, rent, maintenance and repairs, utilities, mortgage interest, or condominium fees can all be deducted or written off as an expense. So, if you are running your small business from a home office you’ve created in your home, these are areas that you and your tax accountant will need to focus on in order to recoup some of the expenses incurred.
4.) Understanding the Tax-Free Automobile Allowances
Another area of concern will be the tax-free automobile allowance. If you have to use your automobile for anything related to your business, a tax can be deducted. The CRA provides you with a tax-deductible allowance that can be deducted every year. This compensation is provided to any employee of a corporation or small business.
5.) Hiring a Professional Accountant
The final area of concern will be the importance of hiring a professional accountant. As a small business owner, the CRA doesn’t look kindly on businesses preparing their own taxes. You should have a professional accountant manage all of your books each and every year. In addition to professionally filing your tax return, they will also be able to provide you with important tax advice that you should take advantage of.
With the information provided above, you now have a better understanding about the 5 things you need to know about income tax in Canada. By understanding this information, you’ll be able to better situate yourself as a small-business owner when it comes to filing your taxes and getting the most out of your return.
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