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10 Best Tax Tips For Small Business

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Tax is the biggest expense for most small businesses. Yet most small businesses don’t have a plan to reduce the amount of taxes that they pay. To stay competitive and profitable, your small business must reduce its tax expense.

Below, I’ll share the 10 Best Tax Tips that your small business should implement:

 

  1. Income Splitting with Your Spouse

 

Consider paying your spouse a salary of the work that he/she performs in your small business. The amount of salary paid must be reasonable about the hours worked and type of work. For example, it would be unreasonable to pay your spouse $100 per hour for 8 hours a day, when your spouse only works 3 hours a day in an administrative capacity.

By income splitting with your spouse, the overall taxes paid will be reduced.

 

  1. Dividend Sprinkling – by Accountant in Mississauga

As an Accountant in Mississauga, I recommend that you pay dividends to your family members who over the age of 18. The first $38,000 (approximately) of dividends that an individual receives is completely tax-free.

Kiddie tax of 46% is applied to dividends paid from private companies to children under the age of 18, effectively defeating the purpose of income splitting with minors.

 

 

  1. Home Office Expenses

As a small business owner, you can write off expenses related to your home office, if you work from home. These expenses include:

 

  • Mortgage interest
  • Utilities
  • Condo fees
  • Property taxes
  • Maintenance and repairs
  • Rent (if you’re renting your home)

 

The following formula is used to determine the portion of the home office expenses that can be deducted for tax expenses:

Expenses relating to the home listed above x (Total Square Feet of Home / Square Feet of Home Office)

You should consult with your Accountant in Mississauga before deducting your home office expenses, as certain other limitations apply.

 

  1. Tax-Free Automobile Allowance

If you own an automobile for which you use for business purposes, you should have your corporation pay yourself a tax-free automobile allowance. The Canada Revenue Agency (CRA) will allow a corporation to pay a tax-deductible allowance of 52 cents per KM for the first 5,000KM and 46 cents per KM after that for kilometers driven for business purposes to an employee of a corporation to compensate him/her for the use of their automobile.

The automobile allowance received by the employee is completely tax-free.

  1. Meals & Entertainment – by Accountant in Mississauga

Expenses that you incur for entertaining your clients are taking your clients out for lunch/dinner are 50% tax-deductible. Make sure you tell your Accountant in Mississauga to keep track of those meals and entertainment receipts!

 

  1. Business Promotion Expenses

Business promotion expenses, such as gifts to clients, marketing materials, and promotional items (e.g. company pens, calendars, etc.) are 100% tax-deductible by your small business.

 

  1. Tax Depreciation – by Accountant in Mississauga

Tax depreciation (also known as capital cost allowance) can be deducted in respect of the capital assets owned by your small business corporation. The tax depreciation permitted as a tax deduction is calculated as a % of the cost of the asset, at rates stipulated by the CRA:

 

  • Furniture & Fixtures – 20%
  • Buildings – 6%
  • Computers – 100%
  • Software – 100%
  • General office equipment – 20%
  • Manufacturing Equipment – 25% the first year, 50% the second year, 25% the third year

It would help if you spoke with your Accountant Mississauga about maximizing your small business corporation’s tax depreciation.

 

  1. Small Business Deduction

Small business corporations in Canada receive a special tax deduction on the first $500,000 of business profits, which effectively reduces the federal income tax rate to only 11%. Canadian provinces also have a small business deduction.

 

  1. Any expenses incurred for business purposes

The Canadian Income Tax Act stipulates that any reasonable expense incurred to earn income from the business is tax-deductible. There are certain exceptions, however, such as meal and entertainment as discussed above.

 

Therefore, as long as the amount of the expense is reasonable, and the purpose of incurring the expenses was about your business, the expense should be tax-deductible.

 

  1. Hire an Accountant!

Last but not least, you should hire an accountant to manage the books of your small business and to provide you with valuable tax advice. The fees that you pay your Mississauga Accountant (or other Accountant) will be more than offset, by the tax savings identified by your Accountant.

 

 

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Canada says U.S. ties could be undermined if Michigan shuts pipeline

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A day before Michigan’s deadline to close down a key crude oil pipeline, Canada on Tuesday issued its strongest remarks so far, saying the move could undermine relations with the United States, its closest ally and trading partner.

Enbridge Inc is preparing for a legal battle with Michigan and courting protests from environmental groups, betting it can ignore the state’s Wednesday deadline to shut down Line 5, which runs under the Straits of Mackinac.

The Canadian government said in a U.S. federal court filing that Michigan had no right to act unilaterally since a 1977 Canada-U.S. pipeline treaty guarantees the free flow of oil between the two nations.

“This case raises concerns regarding the efficacy of the historic framework upon which the U.S.-Canada relationship has been successfully managed for generations,” Ottawa said.

Michigan’s move “threatens to undermine important aspects of that cooperative international relationship”, it added.

The brief said Canada would suffer “massive and

potentially permanent disruption” from a shutdown. Line 5 brings 540,000 barrel-per-day of oil from western Canada to refineries and airports in Ontario, Quebec, Michigan, Ohio and Indiana.

In November, Michigan Governor Gretchen Whitmer gave Enbridge six months to shut down the pipeline that runs four miles (6.4 km) along the bottom of Lake Michigan-Huron, citing fears it could rupture.

The order needs a confirmatory order from a judge to enforce it, and Enbridge and Michigan are disputing whether the issue should be heard in state or U.S. federal court.

The sides are in court-ordered mediation, with the next session scheduled for May 18.

“We will not stop operating the pipeline unless we are ordered by a court or our regulator, which we view as highly unlikely,” Enbridge spokeswoman Tracie Kenyon said in a statement this week.

Joe Comartin, Canada‘s consul general in Detroit who is arguing on behalf of Ottawa, said litigation could drag on until at least 2024.

“I don’t see a court jumping the gun and ordering it closed … until the litigation and constitutional issues are resolved,” he said by phone.

Canada has been lobbying https://www.reuters.com/business/energy/frustrated-canada-presses-white-house-keep-great-lakes-oil-pipeline-open-2021-04-26 Washington officials to keep the pipeline open in what is likely to be an election year in Canada, but the White House has so far not weighed in.

Ontario estimates the city of Sarnia, across the border from Michigan, could lose 5,000 refinery and chemical plant jobs. Industry lobbyists say thousands of U.S. jobs are in danger.

Environmentalists and indigenous groups opposed to Line 5 say the potential job losses are exaggerated. They plan “Evict Enbridge” rallies in Mackinaw City, Michigan, on Wednesday and Thursday.

“We are very hopeful to hear from the governor that there will be accountability measures for operating that pipeline,” said Beth Wallace of the National Wildlife Federation.

Michigan is reviewing what it could do if Enbridge keeps operating past the deadline, said a spokeswoman for the Michigan Attorney General.

Canadian crude market forward prices suggest most traders do not expect Line 5 to shut in coming months, but the lack of certainty is concerning, said one Calgary-based market source.

(Reporting by David Ljunggren and Nia Williams; Editing by David Gregorio and Marguerita Choy)

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Enbridge vows to keep pipeline open, girds for legal fight with Michigan

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Canadian pipeline company Enbridge Inc is squaring off for a legal battle with Michigan and courting protests from environmental groups, betting it can ignore the U.S. state‘s Wednesday deadline to shut its oil pipeline that runs under the Straits of Mackinac.

“We will not stop operating the pipeline unless we are ordered by a court or our regulator, which we view as highly unlikely,” Enbridge spokeswoman Tracie Kenyon said in a statement this week, ahead of Michigan’s deadline for shutting the line.

Line 5 is a link in Enbridge’s network to bring oil exports from western Canada to refineries and airports in Ontario, Quebec, Michigan, Ohio and Indiana. In November, Michigan Governor Gretchen Whitmer gave Enbridge six months to shut down the 540,000 barrel-per-day pipeline that runs four miles along the bottom of Lake Michigan-Huron, citing fears it could rupture and spill.

The state’s order still needs a confirmatory order from a judge to enforce it, and Enbridge and Michigan are disputing whether the issue should be heard in state or U.S. federal court.

The sides are in court-ordered mediation, with the next session scheduled for May 18.

Joe Comartin, Canada‘s consul general in Detroit who is arguing on behalf of the country’s federal government, said litigation could drag on until at least 2024.

“I don’t see a court jumping the gun and ordering it closed … until the litigation and constitutional issues are resolved,” he said in an interview.

The Canadian government has been lobbying officials in Washington to keep the pipeline open in what is likely to be an election year in Canada, but the White House has so far not weighed in on the matter.

The Ontario government estimates that the city of Sarnia, just across the border from Michigan, could lose 5,000 refinery and chemical plant jobs. Industry lobbyists say thousands of jobs are also at risk in the United States.

Environmentalists and indigenous groups opposed to Line 5 say the potential job losses are exaggerated, and are planning “Evict Enbridge” rallies in Mackinaw City, Michigan, on Wednesday and Thursday.

“Past May 12, Enbridge will be operating illegally as per state laws. We are very hopeful to hear from the governor that there will be accountability measures for operating that pipeline,” said Beth Wallace of the National Wildlife Federation.

Michigan is reviewing what remedies would be available to the state if Enbridge keeps operating past the deadline, said Lynsey Mukomel, a spokeswoman for the Michigan Attorney General.

Canadian crude market forward prices suggest most traders do not expect Line 5 to shut in coming months, but the lack of certainty is concerning, said one Calgary-based market source.

“We are looking at all our options and we will leave no stone unturned in defending Canada‘s energy security,” Natural Resources Minister Seamus O’Regan told an emergency parliamentary debate on the pipeline last Thursday.

“We will be ready to intervene strategically at precisely the right moment,” he continued, without giving details.

 

(Reporting by David Ljunggren and Nia Williams; Editing by David Gregorio)

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U.S. State Dept approves potential sale of AEGIS Combat System to Canada

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The U.S. State Department has approved the potential sale to Canada of 4 AEGIS Combat Systems made by Lockheed Martin in a deal valued at up to $1.7 billion, the Pentagon said on Monday.

The Pentagon said the sale of the powerful missile and radar systems to the NATO ally would “significantly improve” network-centric warfare capabilities for U.S. forces operating globally alongside Canada‘s.

AEGIS systems are primarily used aboard ships though they have been adapted for land use.

The package would include four shipsets worth of the AEGIS Combat System and three shipsets of the MK 41 Vertical Launch System as well as support equipment, spares and technical support, the Pentagon said.

The Pentagon’s Defense Security Cooperation Agency notified Congress of the possible sale on Monday.

Despite approval by the State Department, the notification does not indicate that a contract has been signed or that negotiations have concluded.

 

(Reporting by Mike Stone in Washington; editing by Grant McCool)

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