In reality, we should be preparing our taxes all year-round but with all that is happening in the world, your tax preparation is probably not as far along as it should be.
When we are ill prepared with time running out confusion and panic sets in.
Tax preparation can be a different process for various businesses but, to lighten the pressure, we will provide you with useful hints and strategies to help you prepare for your taxes.
Planning and Research
If you anticipate there are changes that could impact your next return, keep up to date with tax implications as they could impact your decision-making. Research any new laws and amendments ahead of time in order to be prepared. Keep in mind that failing to prepare, is preparing to fail.
Keep it organized
Tax preparation starts with a good filing system. It is vital to keep track of any deductions throughout the year. Keep clear records of anything your business may be eligible for as a deduction as well as any expenses. Consider scanning or taking pictures of these documents for digital storage (Accounting platforms such as QBO, Xero have functions to capture receipts with your phone and the photo directly uploads into your accounting data). Having soft copies of necessary receipts and documents is absolutely essential.
Figure out which Tax Return Is Right for Your Business
If you’re a sole proprietorship or partnership, you’ll need to file your personal tax T1 package along with the income from your business on a T2125 form. In the case of incorporated businesses, a T2 corporate tax return will need to be filed.
Deadlines, Due Dates, and Late Fees
It is imperative that you know when your taxes are due. For sole proprietorship or partnerships, the deadline is June 15th. However, keep in mind that you’ll have to pay any income tax owing by April 30th to avoid any late fees or penalties. Technically you do have the option of applying to the Canadian Revenue Agency (CRA) for a change of date to match your fiscal year, but approval is not guaranteed.
With regards to Incorporated businesses, you can choose any fiscal year end date. In the event of any balance owing, the business only has two months after their fiscal year end to settle any outstanding balance. For Canadian Controlled Private Corporations, there is a 3rd month after year-end before taxes are due.
In cases where you are late, you’ll be charged 5% extra as well as an additional 1% for every month, up to 12 months. Take note that if you’ve been late in any of the last three years, these late penalties could also be doubled for up to 20 months.
What Deductions Are You Entitled to?
It is not always easy to know what deductions your business qualifies for. Sometimes it is vital to speak with an accountant to find out what’s deductible for your business. You may feel that consulting an accountant is costly but consider how professional help could end up saving you money in the long run. Strata-G is a virtual accounting firm ready to streamline your accounting system with the best in cloud-based accounting solutions. At Strata-G, we have implemented value-based pricing that works for your company, with all pricing agreed to up front – no surprise billing. Did we mention, no billable hours!
If you found this informative, please check out our other blogs for more tips and strategies!
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For a more detailed, professional overview of tax preparation, get in touch with the Strata-G team. We offer full-service virtual accounting services from corporate tax to bookkeeping, tax consulting to startup accounting, accounting software management and more. Send us a message online and we’ll help you figure out the best strategy with our next level accounting services.
