Paying your taxes as an individual is one thing but once you start running a small business, it’s a whole different game!
There are many aspects of a small business to take into consideration when it comes to filing your taxes from what you can deduct to how to manage employee payroll.
But don’t worry, we have you covered! Liu & Associates is a knowledgeable accounting firm with years of experience filing small business taxes.
Let our expertise guide you through the process with this tax guide for small businesses:
Common Deductions for Small Businesses
While there are many deductions you can take advantage of as a small business, there are the common ones you should take into consideration.
Keep in mind that a small business accountant can help you explore all possible deductions for your small business and maximize your tax return!
Rent and Property Taxes
You can claim property taxes that you pay on your business building. However, if you work from home, your property taxes need to be claimed under home office or business-use-of-home expenses.
Likewise, if you rent your business property or home, you can claim this amount as well. Keep in mind for at-home business situations, you can only claim a percentage of your home office compared to the total space of your home.
It’s important to keep a record of rent receipts, lease agreements, and property tax receipts in case you are audited by the Canada Revenue Agency.
Repairs and Maintenance
As a small business, you can also claim expenses related to repairs and maintenance but these need to be carried out in order to increase your business earnings.
Labor costs related to repairs and maintenance are capitalized expenses, meaning that you can only claim a percentage of those costs over a period of time via amortization or depreciation.
Repairs reimbursed through your insurance company cannot be claimed on your small business taxes.
Salaries and Wages
You can deduct the salary and wages you pay to your employees as well as other payroll-related expenses. A small business accountant in Edmonton, such as Liu & Associates, can help you ensure these amounts are properly claimed.
If your small business makes use of a company vehicle, you can write off expenses related to the vehicle such as fuel, oil, insurance, lease payments, parking fees, repairs, maintenance, and registration fees.
These are considered capital cost allowances (CCA) because a vehicle is considered depreciable property.
When you claim expenses related to your company vehicle, the amount your claim is proportional to the amount of business mileage compared to total mileage throughout the year. For this reason, you will have to keep a log detailing both business and personal use of the vehicle.
Home Office Costs
When you run your small business from your home, you can claim deductions on expenses related to your home office space including mortgage interest, utilities, property taxes, home insurance, repairs, and maintenance.
The amount you can write off depends on the size of your office compared to the size of your home.
Fortunately, you can also claim accounting expenses when it comes to your small business taxes.
Having a small business accountant in Edmonton is beneficial since you can claim accounting-related fees on your income tax while ensuring your finances are properly handled!
Important Tax Dates and Deadlines for Canada
If you are self-employed, you do not have to submit your taxes by April 30, which applies to individual tax returns. Instead, you have until June 15th.
For sole-proprietors or partnerships, you must have your taxes submitted by the beginning of May if your fiscal year matches the calender year. Otherwise, your small business taxes are due six months after the end of your fiscal year.
Responsibilities for Payroll and Employees
If your small business has employees, you are required to collect and remit deductions from your employee’s pay as well as make contributions in addition to employee deductions.
You must also report your employees’ earnings and pay tax on the income you earn.
Deducting Employee Tax from Payroll
As an employer, you are required to deduct income tax as well as CPP (Canada Pension Plan) contributions and EI (Employment Insurance) premiums. You must also match the CPP amounts deducted and contribute to your employees’ EI premiums.
The amount of deductions and contributions depends on the employee’s income. To find out how much you have to contribute or deduct, you can always refer to a small business accountant in Edmonton to help you with corporate tax planning or contact the CRA.
Reporting Employee Earnings
When reporting employee earnings, you are required to fill out special forms to report salaries, wages, and taxable benefits. You must also fill out a T4 to provide to your employees by the end of February for their individual tax returns.
When remitting income tax that has been deducted from your employees’ pay, the deadline is generally the 15th of the following month. If the 15th falls on a weekend, payment is due by the next business day.
If you do not remit these deductions on time, penalties may apply.
However, some small businesses are allowed to do this on a quarterly basis but you have to apply for this program through the CRA.
Getting Help From an Accountant or Bookkeeper
When it comes to corporate tax preparation for small businesses, there are a lot of moving parts and not filing your taxes correctly can result in penalties and interest.
This is why it’s important to have a small business accountant in Edmonton by your side! Our team at Liu & Associates can help you prepare your small business taxes from start to finish.
Our expertise means that your finances will remain in order throughout the year, ensuring that tax time is a breeze!
If you’re ready to get started, feel free to contact us today. Our dedicated team is ready to answer all of your questions regarding small business taxes.
We look forward to hearing from you!