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FBC [ebook] 7 Big Mistakes Small Business Owners Make At Tax Time


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Are you a small business owner? Do you hate paying taxes? You are in luck. The good folks at FBC (including me) have put together this ebook on the mistakes you can avoid at tax time to save your money.

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FBC [ebook] 7 Big Mistakes Small Business Owners Make At Tax Time

  1. 1. © Farm Business Consultants Inc. (FBC) http://www.FBC.ca7 Big MistakesSmall BusinessOwners Makeat Tax Time
  2. 2. © Farm Business Consultants Inc. (FBC) http://www.FBC.caCopyright © 2013Farm Business Consultants Inc. (FBC)All rights reserved. No part of this book may be reproduced, stored in aretrieval system, or transmitted in any form or by any means, electronic,mechanical, photocopying, recording, scanning, or otherwise, without theprior written permission of the publisher.DisclaimerAll the material contained in this book is provided foreducational and informational purposes only. Noresponsibility can be taken for any results or outcomesresulting from the use of this material.
  3. 3. © Farm Business Consultants Inc. (FBC) http://www.FBC.ca96 Years of Temporary TaxationIf tax stuff interests you, check out our[Infographic] “The Canadian Tax Landscape –96 Years of Temporary Taxation” detailing howfar we’ve come since the first personal andcorporate taxation occurred in Canada duringWorld War One.For the full [Infographic], click here:
  4. 4. © Farm Business Consultants Inc. (FBC) http://www.FBC.caPrefaceWith over 20,000 farm and owner/operator small businesses served byour 12 offices in Ontario, Manitoba, Saskatchewan, Alberta and BritishColumbia, we know the importance of making sure you get to keep everysingle penny that you’re entitled to under the laws of Canada when filingyour personal and corporate taxes.The correct approach to deciding which strategies to follow as well asdiligence around record keeping are the two magic ingredients of anysound financial plan for family businesses.Last year, we saved $37M in taxes for FBC Members. If any of thesestrategies seem like they might work for you, we invite you to talk with or see what a membership might look like for youand your business:, we come to you!
  5. 5. © Farm Business Consultants Inc. (FBC) http://www.FBC.caAs a small business owner, you’re busy wearing manyhats. You don’t have time to be a tax expert, too!Avoid these mistakes and you can master the visor:1. Overlooking lesser known tax deductions2. Forgetting to give credit where credit is due3. Missing tax filing deadlines, or not filing at all4. Commingling personal and business finances5. Neglecting to make tax-savvy investments6. Failing to let your family lend a helping hand7. Ignoring government incentive programs
  6. 6. © Farm Business Consultants Inc. (FBC) http://www.FBC.caMistake 1:Overlooking lesserknown tax deductions
  7. 7. © Farm Business Consultants Inc. (FBC) http://www.FBC.caYou probably know about many of the tax deductionsavailable to your business — operating costs like supplies,advertising, office rent, etc.; meal and entertainment costs(don’t forget the 50% rule); and auto expenses (be sure tokeep an accurate auto mileage log).Of course, if you operate your business out of your homeyou can deduct a portion of utilities, property taxes, houseinsurance, and mortgage interest.But, did you know you can write off the amortization ofassets including intangible ones such as goodwill,trademarks, and some patents? What about writing offuncollectible invoices as bad debt?Don’t miss out on these deductions!
  8. 8. © Farm Business Consultants Inc. (FBC) http://www.FBC.caMistake 2:Forgetting to give creditwhere credit is due
  9. 9. © Farm Business Consultants Inc. (FBC) http://www.FBC.caYour small business is eligible for tax credits.For example, you can claim your input tax credits forGST/HST paid on goods and services used in makingtaxable and zero-rated supplies.If you’re self-employed, claim CPP contribution payable onyour income. There are also investment tax creditsavailable on specific asset purchases.Forgetting tax credits means money out of your pocket.
  10. 10. © Farm Business Consultants Inc. (FBC) http://www.FBC.caMistake 3:Missing filing deadlines,or not filing at all
  11. 11. © Farm Business Consultants Inc. (FBC) http://www.FBC.caSurprisingly, many small business owners fail to file a taxreturn or file after the deadline.Apart from catching some unwanted attention from theCRA, not filing a tax return means losing out on somefinancial benefits. GST/HST tax credit and the Child TaxBenefit programs are both based on declared net income.Your tax return also creates the contribution room in yourRRSP. Of course, filing on time means never having to paylate-filing penalties. And we all hate penalties, don’t we?And don’t forget, even though the self-employed tax filingdeadline is June 15, any amount owing is due April 30 toavoid interest.
  12. 12. © Farm Business Consultants Inc. (FBC) http://www.FBC.caMistake 4:Commingling personal& business finances
  13. 13. © Farm Business Consultants Inc. (FBC) http://www.FBC.caSo, you’re at Costco picking up some groceries and youdecide to grab some supplies for the office. You aren’tlikely to pull out one credit card for the bread and milk andanother for the paper and printer ink. But, maybe youshould. Keeping your business finances and homefinances separate is very important.Commingling personal and business finances could leadto overlooking a legitimate business expense or claiming apersonal expense as a business deduction.In addition to potentially increasing the likelihood of a CRAaudit, this “piercing of the corporate veil” makesprotecting your personal assets more difficult.Just say no to commingling.
  14. 14. © Farm Business Consultants Inc. (FBC) http://www.FBC.caMistake 5:Neglecting to make tax-savvy investments
  15. 15. © Farm Business Consultants Inc. (FBC) http://www.FBC.caTaking advantage of tax laws as they pertain toinvestments is a great way to save on your tax bill. Mostknow the benefits of investing in TFSAs and RRSPs butwhat about timing the triggering of capital gains andcapital losses of your unsheltered investments to reduceyour overall tax burden.Did you know that you can deduct interest costs on moneythat you borrow to earn business income? Even theinvestment you make in your home mortgage can be madeinto a tax deduction.
  16. 16. © Farm Business Consultants Inc. (FBC) http://www.FBC.caMistake 6:Failing to let family lenda hand
  17. 17. © Farm Business Consultants Inc. (FBC) http://www.FBC.caRunning a small business requires the support andunderstanding of your family. We all know that. But, didyou know that your family can also lend a hand by helpinglower your tax burden?By putting family members to work — and paying them asalary — you can reduce your overall family tax burden.You can also improve your tax situation by incomesplitting with your spouse. You can invest in a spousalRRSP, split up to 50% of pension income with yourpartner, and even loan money to your spouse (or child) forinvestment purposes.And, invest in your children’s education through an RESPand earn a government grant of up to $500 each year.
  18. 18. © Farm Business Consultants Inc. (FBC) http://www.FBC.caMistake 7:Ignoring governmentincentive programs
  19. 19. © Farm Business Consultants Inc. (FBC) http://www.FBC.caThe Scientific Research and Experimental DevelopmentProgram (SR&ED) encourages Canadian businesses toconduct research and development (R&D) by providingcash refunds and/or tax credits for your R&D expenditures.The hiring credit for small business gives you relief fromthe employer’s share of employment insurance bycrediting up to $1000 on the payroll account, based on theincrease in the employer’s EI premium paid in one yearover those paid the previous year.The apprenticeship job creation tax credit is a non-refundable tax credit equal to 10% of the eligible salariesand wages payable to eligible apprentices to a maximumcredit of $2,000 per year for each eligible apprentice.See, the taxman isn’t so bad after all.
  20. 20. © Farm Business Consultants Inc. (FBC)