As a small business owner, you must find as many ways as possible to earn tax breaks, especially during times of economic uncertainty. By paying fewer taxes, you have more revenue left over to sustain your business or invest in new growth opportunities.
Paying less tax in Canada requires a multipronged approach. Not only must you stay organized, but you should also try to take advantage of professional services. In addition, you should try some cost-saving measures that can also decrease your tax debts.
Here are some tax-saving tips that may help your small business in Canada:
1. Find a Good Small Business Accounting Firm
While the idea may seem counterintuitive, sometimes you must spend money to make or even save money. If you live in Canada’s most populace city, a good small business accountant in Toronto can help you manage your books and reduce your tax obligations to the government.
Aside from taxes, the right firm can track your fees, daily operation costs, income, etc., to help you maximize efficiencies and streamline your processes. When looking for an accounting firm, always partner with experienced small business accounting specialists that understand the ins and outs of small Canadian companies.
2. Stay Organized
Maintain your records with meticulous detail, including tax receipts, to maximize your tax deductions. Remember, it’s not enough to keep notes — you must have hard copies of your receipts to show to the government in case of an audit.
It would help if you also tried to keep your personal and business accounts separate. Pay for your company expenses with your company’s credit card and your personal costs with your personal debit card. This will help you keep your books clean in the eyes of the CRA.
Of course, always try to pay your taxes on time. Interest rates can cause your tax debts to increase significantly over time.
3. Keep Track of Your Home Office Expenses
With more Canadian businesses working from home in order to follow lockdown orders, there’s more opportunity for home office cost deductions. After calculating the percentage of your home space dedicated to your office, you may be able to write off some of your rent, utilities, internet bills, mortgage, etc.
4. Write Off Other Expenses
Remember to write off other expenses such as a new computer for your business or a capital loss. If your company has moved at least 40 km, you also can write off certain expenses related to the shift.
5. Employ Family
If you employ a spouse or a child, their employment income may be tax-free in a certain range of amount. You may also be able to count their salaries as tax deductions. Of course, their compensation must be reasonable, or you may raise red flags with the CRA.
6. Tax-Advantaged Savings Plans
Take advantage of a Retirement Savings Plan (RSP) or Tax-Free Savings Account (TFSA) to get even more tax breaks.
These are just six of the many ways you can earn some critical tax credits. Work with a reputable small business accountant in Toronto like Tangs Accounting Services to learn more about your tax-saving options.
