With tax season (literally) around the corner, there is no better time than now to put your bookkeeping hat on and start thinking about your 2019 taxes. You’re doing it right if you’re already getting a head start—starting early means you can determine if there are any changes to the Canadian Revenue Agency (CRA) small business tax code—allowing you to reap the benefits of any small business deductions that you’re entitled to, along with a few other, like penalties and fines.
As confusing as tax season can be, below are 4 tips to help you navigate through any frustrations related to filing your taxes:
1. Know Your Dates Before Filing
Preparing your books early to meet important tax deadlines is critical to help avoid any unwanted penalties or fines. With the CRA, there are always unwanted consequences—so it’s important to create enough buffer room to provide contingency for that likelihood.
Do you know when the 2019 tax filing deadline is in Canada?
If you’re a small business owner, independent contractor, or entrepreneur, you have until June 17, 2019 to file your taxes. Typically, June 15 is the cut-off; however, this year it falls on a Saturday, giving most of you a few extra days to prepare, fill out, and send in your taxes. Good news, right?
For those who owe taxes, the cut off to pay is April 30, so if you think you will owe money to the CRA, it’s good practice to start preparing your taxes prior to this deadline. The earlier you file your taxes, the less likely you will miss any upcoming, important deadlines that may cause penalty fines. And if you end up being owed a tax refund, you’ll also receive your funds sooner.
2. Know How to File Taxes
You can file your taxes in two ways: by regular paper mail or electronically through the Internet. Small business owners are increasingly sending their tax returns in electronically due to convenience. According to the Government of Canada, only 13.2% of Canadians filed their taxes by mail. In contrast, 68.8% of Canadians filed their taxes electronically and of those, the majority (57.3%) had their taxes sent in by EFILE, an automated service that allows approved tax preparation service providers and discounters to send individual income tax return information to the CRA directly from EFILE–certified tax preparation software.
3. Know the 2019 Small Business Tax Changes
It can be frustrating knowing that the CRA makes regular changes to tax laws—and 2019 is no different. Here are some changes to keep in mind:
- Tax Rate: Small business tax rate is changing from 10% to 9% in 2019. With this reduction, combined federal and provincial average income tax rate for small business in Canada will be 12.2%.
- Passive Income: Starting January 1, 2019, small businesses that hold more than the new limit on passive income (i.e. stocks, bonds, real estate), will have to pay higher corporate tax rates compared to previously. Depending on how far over the new limit you are, those earnings may take a larger hit compared to previous years.
4. Don’t Neglect These Small Business Tax Deductions
There are a plethora of deductions that small business owners can claim to help reduce the amount they have to pay out in taxes. As long as you keep track of all your receipts, you’ll have evidence in the case that the CRA asks for clarification for your tax return. Here are some of the expenses that your small business can deduct:
- Home office expenses
- Advertising and promotions
- Business start-up costs
- Mortgage interest
- Repair and maintenance
- Property taxes
- Capital cost allowance
- Business travel costs
- Meals and entertainment (up to 50%)
- Vehicle expenses and fuel costs
- Gifts for holidays or special occasions
- Accounting and legal fees
Get The Most Out Of Your Tax Return
Every year, we tell small business owners to get a head start on tax season, and this year, it won’t be any different. Not only do we want you to prepare your small business taxes accurately and early, but it is critical that you take advantage of every deduction that you—and your business—are legally entitled to.