Many
small to medium sized companies are in the mind frame of doing your taxes on
their own. The ability to bypass
the accountant stage they believe will save there business significant dollars
and taking their books that have been keeping by a computer program so readily
available in stores everywhere and going straight to the filing with the Canada
Customs and Revenue Agency.
Now
the question is this a BAD thing and how reliable is the information that your
entering into these programs?
The
problem:
Canada Customs and Revenue Agency requires you to file an income statement every year, depending on when if you are a sole proprietor or incorporated business you will have to determine when you need to file. Now, they also expect a detailed report as to how much money has come in (revenue) and how much money is going out (expenses). This is where the problem comes in, depending on what province that you are in you will be allowed to either deduct or write-off these expenses, the key is that there are designated categories which will receive different percentages of deductions. So you as a business owner need to know where you can place your deductions to receive the maximum amount of benefits for your business. So how do you know if you’re in the lowest possible tax bracket?
The
answer:
Mini
to Small sized businesses with revenue under $20 000.
Filing on your own is not a bad option for
most companies that are STARTING OUT and are producing under $20 000 in
revenue! There are many
computer programs such as quick books, simply accounting, and MYOB have
made it very easy to track and submit your personal and small business income
taxes. The key to this is to make sure that you keep all your
records update and that you separate your business expenses and your personal
expenses. A note to all small
business owners: Many business
owners try to write off services, items, or products that they have used
personally and claimed them as business expenses.
We highly recommend that you get a proper advice from a professional in
the field before you begin to write off or attempt to deduct anything.
As excessive or unknown deductions and write offs may result in an audit
from Canada Revenue and Customs Agency. This
has been many times referred to as riding out a tropical storm, and in extreme
cases shutting down or halting your business activities.
The large majority of time you will never really have
to worry about your tax bill on a company this size.
The main reason is that your tax bill will probably fall under the $2000
mark after your deductions and write-offs are subtracted.
So even when filed at the highest tax bracket compared to filing at the
lowest tax bracket you might see a change of $100.
So in summary is it a bad thing for small businesses
to file on there own “NO”. Just
be sure to keep everything clear and understandable so anyone wanting to review
your taxes with you is able too.
Small
To Medium Businesses with revenue over $20 001 and under $750 000:
As a small to medium business that is
producing over $20 000 you should definitely be going to a professional taxation
person to have your accounting done by a professional.
In cases of higher income levels you really want to be sure that you have
placed all of your entries in the correct category.
The problem comes with greater incomes are that you get taxed at high
rates. In some instances companies
have experienced difference of over $10 000 in taxes that were filed improperly
on a marginal profit, thereby reducing their profits even further.
An aggressive accountant can save you upwards of over $50 000 tax dollars
in a year for the high-income levels. The
key is to make sure that you understand what kind of credit and deductions you
can use; also a good accountant that will combine your personal and business
taxes looking at your ENTIRE situation instead of just one instance.
For the people who are not tax specialist there are many ways to save on
tax dollars as there is over 11 000 different interpretations of tax law which
could be used to your advantage.
When dealing with medium sized businesses it is also
advisable to maintain daily or weekly bookkeeping records.
Although maintaining the records in house is a convenient way to keep
track of your books it is not always the best way to track your books.
We recommend that you have some professionals maintain your books,
especially if you are having more than 10 entries a day.
There are many companies out there that will come out to you and either
maintain your records on hand or be able to take away your records on a daily or
weekly basis. Options are available
for any situation that you may have. No
matter what you choose, make sure you have a set of solid books. In a case of an audit a solid set of books is like having an
orbital defense system on your side.
Closing
thoughts:
In
summary preparing your taxes the business owner whether by yourself or through a
firm, you should always make sure that you file them properly.
Do not evade taxes, hide income, or falsify information, there are enough
different interpretations and deductions in most cases if you own a business to
file your taxes properly and still keep the majority of your money in your
pockets.
In
any case you should always make sure that you maintain a solid set of books
whether you are a mini or small business to a medium sized business.
Our recommendation in any given case is to hire a professional
bookkeeper. With a professional
bookkeeper can prepare your books for an actual accountant, in the end you will
be please that you did for two reasons. Reason one, is that you will now always have a firm
understanding of where your financial position is no matter what time of the
year. Reason two you will always be
protected from a Canada Customs and Revenue Agency audit.
Finally,
as a
business owner you should realize that any professional accounting of tax
services that you use are completely and 100% written off
when you file you taxes. This means
that your income will be reduced by the amount that you paid for the services
that you used.
Therefore we highly recommend that you and your business definitely get a
professional accountant and an aggressive one that will back up there work if
required too.
"TO KNOW WHERE YOU ARE GOING YOU NEED TO KNOW WHERE YOU ARE COMING FROM"
