Crunching the Numbers: How to Prepare for Tax Season

Entrepreneurs don’t open small businesses for the thrill of navigating tax season. Not when there are so many other to-dos begging for attention.

Yet when the new year—a time of heightened goal-chasing and optimism—rolls around, so too does the tax prep. Talk about buzz kill.

Ideally, you’ve been prepping for the time of the year year-round. If not though, you’ll learn the benefits of doing so when approaching each of the how-to steps below.

Get Your Paperwork in Order

To help get your bearings, start by gathering all necessary forms and paperwork. If your business is incorporated, you’ll be looking at the T2 form. For self-employed individuals, you’ll be required to fill out T4A and T2125. These forms and information on filing separate provincial and income tax returns can be found on Canada Revenue Agency’s (CRA) website.

Filling out these forms will be easier with some internal paperwork on hand. For example, gather up T-slips, income and expenses information, receipts, and invoices. Here’s a comprehensive checklist from QuickBooks to review.

Small Business Tax Checklist

Double-check Expenses and Deductions

The more money you can write-off as a small business, the less you’ll owe. Just be smart about it and do your research.

Home-office expenses, for example, are a write-off to be especially cognizant of. If the majority of your work is done from home, you should be able to deduct a portion of your rent, mortgage, utilities, and even workspace supplies.

In that same vein, let your employees know about the CRA $400 tax deduction. This allows them to claim a flat rate deduction on home office expense claims.

Act Quickly to Get Your Accountant Up to Speed

If you’re working with a tax professional for filing this year, be clear, prompt and concise with communications. They’re likely to require information and documentation sooner rather than later.

Keep in mind that if you have questions or specific needs to address, you’re probably not the only one. It’s a busy time of the year and there’s only so much tax advice to go around when you wait until the last minute to seek it.

Mark Deadlines on Your Calendar

The tax filing deadline for corporations this year is April 30. Self-employed individuals have until June 15 to file.

Set up calendar reminders for these dates in the months leading up to them. Additionally, break down the tax filing process as a whole into smaller, more manageable goals—like pulling receipts, recording expenses, and mailing employee-specific forms. Set dates for each task to help you avoid waiting until the last minute.

Create a Filing System for Organization

As previously mentioned, tax preparation is a year-long process. Work to build habits around better money management.

Save tax filings for every year in a secured folder (with back-ups accounted for), document employee information, and save receipts. Assign clear memos or tags to documentation as you go so you don’t have to backtrack for the finer details at a later date.

By Staples Canada

February 16, 2021

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