Category Archives for "Business Income Taxes"

Important Tips for Keeping Proper Business Tax Records for CRA

By Randall Orser | Business Income Taxes

Often times during a small business start-up, the last thing thought about or taken care of is dealing with taxes. This is a huge mistake that must be avoided at all costs. Thinking about the various types of taxes that have to be dealt with when starting a new business should be a priority. In order to keep Canada Revenue Agency (CRA) and other taxing agencies happy proper record keeping is a must. Proper planning in the beginning stages of a new business will make doing taxes much easier when the time comes.

Here are a few simple tips to assist in keeping proper and adequate records.

Any time a purchase is made, it is critical that the receipt is kept and filed in a safe place like a locking file cabinet or at a minimum a file box. If ever audited by CRA, it is essential that all receipts are made available, as they will most certainly request receipts to verify specific purchases. Proof of expenses must be provided to CRA or they will disallow them as an expense and add that amount back into the income category.

Another area that tends to suffer in the small business community, is not keeping business financial books current. Falling behind with bookkeeping is not only frustrating but takes much more time to sort out when trying to catch up. To remedy this, write down all income and expenses as they happen, preferably on at least a daily basis. Organization is an integral part of successful business ownership, and organized books are not only essential in keeping CRA happy, but in helping track the performance of a business.

More and more the government, including CRA, is accepting electronic records. Let’s face it, most receipts are printed on thermal paper now, which degrades over time or even be destroyed. Scanning your receipts and keeping the original with the scan is a great way to ensure you always have your records.

Regardless of the type of tax that may need to be paid (income tax, payroll tax, state tax, etc.), it is critical that the filing of the proper forms is done on a timely basis. Late filing and late payment of taxes will result in paying hefty penalties and interest on the balance owed to the various taxing agencies.

Audits by CRA or other taxing agencies do not have to be feared, as long as the proper documentation is in order. Again, the more organized the records are, the easier it will be to prove and make a case to improve the businesses position. Statistically small businesses and small business owners are audited more often by CRA.

In closing, any existing small business or brand new start-up can see that proper record keeping should be a priority. The hiring of a professional bookkeeper and/or accountant to assist in setting up and maintaining the books is a highly beneficial option that should be seriously considered.

Year-End Tax Tips for Small Business Owners

By Randall Orser | Business Income Taxes , Small Business

Many small businesses, especially single proprietorships, have scaled-down accounting operations. If you’re one of those small business owners who work on simplified accounting, you should still make it a point to work on your taxes before the year ends. While everybody files income taxes in April, do remember that those taxes are for the income earned during the prior year. Hence, you should take advantage of the time until the end of the year to work on your income and expense accounts so you could cut down your business taxes come April. This should also provide you with the opportunity to plan your financial strategies for the next year.

Great Tax Tips for the Small Business Owners

While you may be excited about the upcoming holiday celebrations, do remember that you still have a few things to do for your business. Take a look at the following  year-end tax tips:

Review the financial standing of your business.

There is no problem if you are handling the financial aspects of your business by yourself; many other small scale business owners do because they cannot afford an accountant’s salary. Just remember to take a close eye at your year-end profits because that will be the basis for your taxes. If you wish to pay lower taxes, then you have to show a smaller profit. You can do this by drawing as much as you can as your December paycheck. And before the year ends, make sure that you reduce the total amount you are depositing to your business account. Then, try to issue as many checks as you can to pay for all your business-related expenses.

See to it that all bills due in December are paid early.

Go over our bills one by one, and  pay them all – rent, utilities, insurance, health care, as well as the Christmas bonuses you promised your employees. You should be able to increase your deductions and end up with lower taxes.

Now is the time to buy your office supplies and equipment.

One smart move is to replenish and perhaps even add to your office supplies before the year ends. Remember, your strategy to decrease taxes is by building up your expenses. The purchase of office supplies should do the trick for you. If you had earlier planned on buying some expensive office equipment like a new computer system, or renovating your office and buying new desks and chairs, you may want to execute your  plans before the new year rolls in. However, make sure that your planned expenditures can be supported by your current cash flow. Moreover, everything that you purchase should be delivered, installed and in use before the end of the year.

Income deferment

If you are using the cash-based accounting method, you can delay the invoicing to your customers and collections from your sales until January of next year. This will effectively reduce the revenues booked for the current year that are taxable this coming April.

Some More Year-End Tax Tips

And if you don’t have one yet, you may want to arrange for your individual retirement plan. Not only will this help you prepare for your future, it can also provide you with  tax shelter benefits. Still, you should realize that if you are running a home-based business, you are entitled to deduct portions of your home expenditures from your business taxes. Authorized deductibles include a share of the rent or mortgage payment, utilities, and other home maintenance expenses.

These year-end tax tips should be able to help you prepare for the unavoidable tax season. With that out of the way, you can truly enjoy the holidays with friends and families.


What records do I have to keep for my business?

By Randall Orser | Business Income Taxes

As a business owner, there are certain records that you need to keep. The obvious being your receipts for expenses you incur and your invoices for your sales. There are other records that you may not realize that you have to keep, such as employee information and payroll documents, contracts, leases, and more.

Income and Expenses

You must keep all your invoices you’ve sent to clients, and even those that you voided. It is best if your invoices are consecutively numbered (1,2,3, etc.). You can keep these electronically or through your accounting software. If you’re going to keep a paper file, sort them by invoice number, and make sure there are no gaps between numbers.

For expenses, keep all receipts for your debit, credit card, cheque, and cash purchases. That means keeping all your telephone bills, cell bills, vendor purchases, meals, advertising, etc. Make sure that for every entry into your accounting system, or showing up on your tax return, there is a matching receipt. Most audits crash and burn because the receipts are not there. You can keep receipts in what CRA calls ‘electronic imaging format’, which basically means a scanned document.

Government Remittances

You must keep all of your government remittance forms you’ve filed including: payroll remittances, GST/HST returns, provincial sales tax returns, workers’ compensation, and any other government agency remittances you need to make. Plus you must keep all documents that support your remittance and any calculations you did to come up with your remittance amount.


You keep records in the format in which you received them whether paper or electronic, plus scanned documents (though at the moment it’s best to keep the paper copies). If you’re using accounting software you must keep a backup for each fiscal year in a safe and secure location (safety deposit box or online is best). For online accounting software, you should do a backup, usually to a spreadsheet, each fiscal year or a printout (paper or PDF). If you’re using a spreadsheet, you should have one for each year and also kept safe and secure. If you’re using a manual system, then we need to talk.

You must also keep all records in Canada unless granted permission to do otherwise by CRA. And, you must make all records available to CRA upon request. Note that CRA can take a backup of your accounting software and run it through their system; from my understanding of the system they use this to flag items they want to look at.

Other Documents

There is other documents that you need to keep that relate to your business and most will relate to your expenses you’ve incurred, some can relate to your sales too.

Payroll documents are the first thing that comes to mind. You must keep employee information (SIN, address, wage rate, etc.), TD1s filled out, employment agreements, ROEs, and paystubs (these will show the hours worked and deductions taken). The best way to keep this information is in a folder per employee; can also be electronic.

Contracts for leased equipment, vehicles, property (your office outside the home), and service contracts for consulting, marketing, etc. Make sure you keep copies, as most of these contracts will state the total value of the contract, the monthly payments, and the sales taxes.

If you have sales agreements, or other agreements/contracts, with your clients, make sure you keep copies, especially for those sales that are a monthly recurring amount.

As you can see, there are many records that you have to keep, for that just in case time that CRA, or some other government agency, comes calling and wants to check over your records.