Small business owners in Canada often face stress from missed deadlines and filing mistakes during tax season. Fortunately, you can reduce this stress by getting your tax return prep work done early.
If you’re unsure where to begin, this short guide can help. After reading, you’ll know crucial tips to help you prepare and alleviate stress during tax season.
Determine the Taxes To Pay
Canada laws require every business to file an annual business income tax return. However, the specific tax return you must file depends on your company’s legal structure.
- For incorporated businesses, use a T2 corporate income tax return form to file your business income.
- For self-employed, partnerships, or sole proprietorships, report your business income on your T1 personal tax return form and Form T2125.
Filing and payment deadlines also depend on your company’s legal structure.
- For self-employed, sole proprietors, and business partnerships, you have until June 15 to file your return. You should also pay the tax you owe from the previous tax year by April 30.
- Individual members of partnerships have a March 31 deadline to file annual partnership information returns.
- Corporate businesses have an annual deadline for filing a return six months after their fiscal year-end.
- Canadian Controlled Private Corporation (CCPC) must pay its taxes three months after its fiscal year-end.
- For non-CCPC, you must pay the tax you owe within two months after your year-end.
Claim Deductions and Tax Credits
Business owners in Canada can claim tax credits and deductions on their tax returns. These deductions can help entrepreneurs save money during tax season.
If you have a registered business, you may claim various expenses on your return, like business use of home and motor vehicle expenses.
Organize Relevant Documents
To lessen the stress during tax time, you should organize your receipts and other relevant financial documents early. You can stay on top of your bookkeeping needs throughout the year by using digital tools that can help you organize your records.
Digital bookkeeping solutions can help you do the following:
- Keep track of invoices and receipts
- Back up any tax deduction claims with accurate documentation
- Prepare for an audit
Decide How You Will Pay Taxes
Today, Canadian entrepreneurs have a lot of options when it comes to paying their taxes. They can do the whole process by themselves, or they can seek the help of an experienced accountant.
If you choose to file your business taxes independently, you can print out tax forms from the CRA website and submit the documents by mail.
You can even file your tax returns electronically using tax preparation software validated by the CRA. The tools make electronic filing of tax return forms safe, easy, and convenient.
If you do not have the time to file your business taxes by yourself, you can hire a tax preparer or a professional accountant. Working with a financial expert can help maximize deductions and help with tax planning.
It would help if you worked with expert tax accountants to organize your financial records properly and avoid filing delays. For example, accountants from Faris CPA can provide you with tax, accounting, and financial services, so you do not have to navigate the tax preparation process alone.