Tax season is approaching, and we’ve compiled some tips to help you get organized and make sure you have everything in place to file your tax return on time.
Financial planning is helpful when it comes to tax time and submitting your tax return. Developing a tax strategy and staying on top of your finances can help you find out if you’re paying too much tax, or if you should increase superannuation contributions to save in payable tax and improve your retirement plan.
“Small business tax requirements vary based on the business’ legal standing. Owners should consult with a tax attorney or accountant to understand their tax strategy and federal commitments. Business and personal income can be coordinated in certain ways to maximize the benefit to the owner as well as the business,” advises business blogger Martin V. Adams.
For most individuals and business owners, the deadline to file your tax return is April 30.
For self-employed individuals and unincorporated businesses, the deadline to file your tax return is June 15. However, it is important to note that any taxes owing must still be paid by the April 30 deadline.
Be aware that the Canada Revenue Agency (CRA) is tough on latecomers. If you are late, expect to pay an extra 5% on the balance owing, plus 1% of the balance owing for each full month that your return is late to a maximum of 12 months.
As an independent contractor, you can legally claim a wide range of costs as non-taxable business expenses. What you can or can’t claim as an expense largely depends on the nature of your business.
For example, if you work from home and have a dedicated space that you use only for work, you may claim a percentage of your rent and utility costs equal to the ratio of that space in relation to your home’s overall square footage.
On the other hand, if your contract defines you as an independent contractor but you do the majority of your work on the premises of a client’s company, you can’t claim your home rent or utilities as an expense.
You should only claim expenses that you can prove are related to your job.
Zoe Share, founder and CEO of social media marketing and communications agency Schmooz Media, says knowing your strengths and weaknesses lie. Sourcing external help if finances aren’t your strong suit can sometimes be the best option.
“Be honest about your strengths and weaknesses. If math and understanding Canadian tax regulations aren’t your strong suit. Pay a professional accountant and get help sooner rather than later. It can cost more, in the long run, to pay the wrong amount during corporate taxes or to allocate your salary incorrectly in your personal tax time.
“You’ll still have to do work along the way, as part of your daily business operations – like keeping track of your receipts, expenses, and managing your invoicing – but at least you can be confident that some of the tough stuff will be taken care of!”