Income Tax Guide To Self-Employed or Small Businesses

In Canada, there are a variety of tax credits available to the self-employed and proprietors of small businesses. In fact, the Canadian Revenue Agency (CRA) deems any self-employed person as the proprietor of a business. As long as you have not incorporated your business (thereby creating a corporation), you may be eligible for the following tax claims. Read on for Liu & Associates’ guide to getting the most out of your self-employed or small business tax return.

EXPENSES

“You need to spend money to make money–“ if it’s been said once, it’s been said a million times… And it’s absolutely true! As any self-employed person or operator of a small business knows, everything from buying equipment to building a client base can make a significant impact on your funds. Luckily, CRA offers tax credits for such expenses. Generally, a non-depreciating expense (ie: stationery, inventory, etc.) is eligible for its full credit for the tax year in which you purchase it. Depreciating expenses (ie: vehicles, furniture, etc.) must have their credit spread over the lifetime of the asset; this involves multiple tax years and is covered under Capital Cost Allowance (CCA).

CAPITAL COST ALLOWANCE (CCA)

If you run a small business or maintain self-employment, major purchases are a fact of life. CRA allows credits for these expenses, but significant items such as real estate, furniture, equipment and vehicles often outlive the tax year in which they were purchased. To account for this, major purchases qualify for Capital Cost Allowance (CCA): a yearly amount– adjusted for depreciation– that can be credited against your tax commitments.

HOME OFFICE

A huge number of successful businesses originally grew out of the homes or living spaces of their founder(s). Modern self-employers or small business operators can claim several different credits. These are available to those that use part of their home as a dedicated workspace or those that consistently work in their living space. Rent/mortgage payments, maintenance costs, utilities, property tax and home insurance are just some of the expenses you can claim if you make use of a home office.

OTHER TIPS

All proprietors should familiarize themselves with the GST/HST requirements for Self-Employed or Small Business
Sole proprietors only need their SIN to file business earnings as part of their tax return; partnerships and corporations require a Business Number from CRA, as well as a CRA Business Account

Still have questions? Contact or visit Liu & Associates today. Our experts will guide you to the best possible tax return for your self-employment or small business.

Bookkeeping vs. Accounting

When it comes to paperwork and numbers, most business owners would rather fill a filing cabinet and focus on other tasks at hand. We all know it can’t be that way because a balanced budget and thorough records are keys to success in business. All large companies have sophisticated accounting and bookkeeping procedures in place; they know just how important financial efficiency is to their bottom line.

If you own or manage a growing business, you need to familiarize yourself with the financial side of things. Read on for a brief rundown on the differences between bookkeeping and accounting.

BOOKKEEPING DEFINED

Bookkeeping is a business’ collection, organization, storage and access of its financial records. This process smoothes daily operations and ensures detailed records are kept. An efficient bookkeeping system should be able to produce accurate and timely financial statements, tax information and internal assessments on demand.

ACCOUNTING DEFINED

Accounting is a more general term than bookkeeping, but it also carries more weight. Where a bookkeeper is tasked with maintaining financial records day-to-day, an accountant’s responsibilities can include the following:

Planning and detailing bookkeeping processes,
Creating checks and balances (controls) within the bookkeeping process,
Proofing collected financial records for efficiency,
Analyzing and predicting financial trends based on individual results,
Working with bookkeepers to ensure the process meets all needs,
Understanding the economic market
much more!

RUN LIKE A WELL-OILED MACHINE

Businesses are made up of a variety of interconnected, moving parts– like a machine. If you build a machine, you want all of the parts working in unison. Imagine a bookkeeper as the essential components of your machine, the ones that keep it running every day. Bookkeepers must be as accurate as they are diligent in accomplishing their tasks, regardless of repetition or an increased workload. This work is demanding, so it is sensible to bring in an accountant– in this scenario: the oil for your machine. Accountants work with your bookkeepers to smooth out all of the hiccups and snags that can happen when you own a business.

Ensure your machine is running smoothly: contact Liu & Associates today for your accounting needs. Our accounting experts can ensure all of your business’ needs are met by working directly with you and your bookkeeping staff. Whether building a system from the ground up or overhauling existing processes, Liu & Associates can provide unparalleled financial guidance and support. Contact us today for a comprehensive consultation with our highly trained professionals.

How to Choose A Personal Or Small Business Accountant

Whether you are starting your first business or taking your self-employment to the next level, choosing an accountant is a vital step to assure your future success. Instead of picking the first Google search result for “accountant,” use this guide to make certain that you are handing your books over to the right people.

What To Look For

While all accountants need knowledge, an excellent reputation is the most essential feature of any accountant. Whether by word of mouth, Yelp review, or a referral list from a professional association (such as the Chartered Accountants of Alberta), it is important to limit your search to accountants that are well known for good work.

Once you have assessed your own business’ needs, compare them with the size and scope of your potential accountant. An accountant or accounting firm with a similar size and structure to your own business is a good starting point to further narrow your search.

Questions To Ask

Once you have shortlisted a handful of potential accounting candidates, set up a series of personal meetings to compare and contrast their strengths and weaknesses. In these meetings, determine how well the accountant matches your needs and make sure to note the following:

Are you licensed? There are three types of licensed accountants: chartered accountants (CA), certified management accountants (CMA), and certified general accountants (CGA). Each certification has a different educational background and varied expertise.
What will you do for me? Some accountants merely review the in-house bookkeeping of a business, though many are often relied upon to advise business decisions and risk management. Find out what your potential accountant expects to contribute to your business and ensure that it aligns with your own expectations.
What do we have in common? Probe your potential accountant for his attitude towards things that matter to you and your business. Is technology the cornerstone of your company? Inquire about your accountant’s familiarity with digital storage or social networking. Looking to aggressively build your business? Find out how your accountant would safeguard you financially.

Make use of these tips to choose the right accountant or accounting firm for your business. Finding the right fit and you will maximize your ability to build a solid foundation and grow it into a sustained success.

Contact the accountants at Liu & Associates today to get started.