The best ways to prep for tax time as a small business

Ask a small business owner for one word they’d use to describe tax season and you’re unlikely to see fun pop up in your list of responses. Think more along the lines of:

●   Stressful

●   Frustrating

●   Confusing

●   Painful

And hey, we get it. Governments aren’t notorious for making taxes easy-to-understand—even if you’re “good with numbers.”

That doesn’t mean you can’t make the process more manageable with a bit of small business tax time preparation. Here are a few ways to get organized.

Review and update your expenses

What you can and cannot consider a business expense is worth understanding sooner rather than later. In fact, you’re doing yourself a favor by tracking expenses throughout the year rather than reconciling everything hurriedly all at once.

Home-based small businesses, for example, may be missing out on tax deductions like automobile expenses (e.g., licensing, registration, and fuel) and home office supplies (e.g., filing cabinets and laptops).

Consider all possible income tax deductions

Small business owners should also be cognizant of other Canadian tax deductions. This includes things like capital cost allowance, contributing to a registered retirement savings plan, and gifts made to employees.

There are naturally rules and policies relative to each—like what constitutes an employee gift or award, for example. But being aware of how to save on taxes sets you up to better check all the boxes once it’s time to file.

Organize ahead of time to cut down on accounting costs

Depending on just how small your small business is, you may not have the luxury of an internal accounting department yet. If you’re outsourcing services, be mindful of how quickly costs can add up.

Take the time you need to make sure things are done right while offsetting costs by gathering all of the receipts and information an accountant will need to file in one sitting. You should also make the best use of time by asking your accountant for the types of tools, records, and organizational systems they’d recommend in streamlining the process moving forward.

Research the best tools to use for filing

If you’re not going to consult with an accountant and attempt to file small business taxes yourself, make sure you have a tool at your disposal for doing so.

There are plenty of tax software and app solutions on the market for walking you through the process.

By Staples Canada

March 01, 2020