The CRA never rests and neither should you!

Why are we talking about this now?  After all, we’ve filed our returns already, and it’s been several months since the deadline. The trouble is, the Canada Revenue Agency never relaxes. As we speak, it is still busily reviewing millions of tax returns and all related matters including the T4. For some individuals, there are still ongoing requests for additional proof or information to verify the accuracy of the numbers.

With the advance of technology, the ability to collect and integrate information is literally at the CRA’s fingertips.  Small and medium businesses need to be doubly diligent in making sure they comply and follow the tax rules.

Below some pointers for your consideration:

• Business vs. personal expenses:  A good amount of small to medium size business owners use their business bank accounts as if they are their own personal bank accounts.  Reasons not to do that: 1) you would have a harder time getting to know the health of your business.  2) CRA will not look upon this favourably if you get audited, unfortunate as it is.

• Business and corporation as separate entity: Taking money out from the business needs to be recorded and reported as income, either by issuing T4 or to file your business/professional activity statement if you operates as a self employed.

• Payout to family members: When paying family members, it should be for job performed, not just as an income splitting tool.

• Home office expenses: Make sure you only include mortgage interest as a deduction for your home office expenses.  Principal is not allowed.

• Do not overuse ‘Other expenses’ category: Be careful not to lump too big an amount in this category for statement of business or professional activities form T2125.

• Mandatory registration for GST/HST: Be sure to get a GST/HST account when you reach $30,000.00 in revenue.  If you have big outlay when starting a business, you are better off registering ASAP to recover the ITC paid.

• Estimated or rounding numbers: Having numbers that end with zeros may suggest to CRA your sales/expenses was done in some arbitrary manner, it will attract unwanted attention.

• Benchmarking by Industry: CRA provides a ‘benchmarking by industry’ site where business owners can review their ‘expense to sales’ ratio.  It will give you some idea how you fare in comparison with your peers and that you should strive to be more in line with the industry norm.

• Voluntary Disclosure Program: If you discover certain omission or error on a return previously filed, you should amend the return or contact the CRA prior to being found out.  By acting first, you most likely could be spared of penalty and possibly some portion of interest, thus minimizing your tax liability.

Do you have any concerns about your income taxes? Whether you are a client or you are using somebody else, it never hurts to ask.

If you would like to sit down and talk or ask questions about your personal income taxes, please do not hesitate to contact us today. We can be reached at 416-495-1098 or info@apbs.ca or go to our contact page!