One of the most important things that new business owners need to learn is how to file the proper taxes for their business. When you were employed in a regular office, all you probably had to worry about was your income tax. But now that you own a business, you will have to learn a little bit more about the tax system.
The good news about being a home business owner is that you can qualify for certain tax exemptions or deductions. The only major requirements are that you should be running the business from home and that you have a clearly defined office area within your home. These tax breaks are specifically designed to help home businesses prosper despite limited resources. To learn more about them, inquire with your local government.
In every kind of business, having an organized system for keeping records is absolutely essential. Every single document that has something to do with your business should be properly filed. And yes, that includes the seemingly insignificant receipts for office supplies or the gas you used for business travel.
Since you are running your business from home, and you have a legitimate office area inside your house, you can enjoy some tax deductions on your home payments and utility bills. For instance, if you are using about a fifth of the total floor area of your home for your business, you can claim a fifth of your total utility expenses. Even if you are just renting your space, you can still claim a portion of your rent.
Being self-employed means you have to take care of paying your own income taxes and Canada Pension Plan (CPP), which would typically be the responsibility of your company if you were employed in a regular office. You are not eligible for Employment Insurance (EI); you can get a medical EI, however, I recommend a private insurance product rather than EI. There may also be other taxes you need to pay, depending on your Province’s regulations.
For most new business owners, dealing with all these taxes can be very confusing, especially if they don’t have any prior experience in the matter. In you find this tax business confusing, you can make the job a lot easier by using a tax software that will do all the computations for you. Many of these programs are available for free and are very easy to learn.
Another option is to hire an accountant. You’ll have to pay him for his services, of course, but oftentimes, the money you pay an accountant is more than worth the savings he can help you realize. With an accountant’s knowledge and expertise, he can reduce your total tax by a significant percentage — much more than you can ever get by just relying on a tax software.
One of the common mistakes new business owners make is undermine the importance of paying their taxes before the deadline. Even a single late payment will not look good on your record so make sure you keep track of tax deadlines at all times.
What Types of Income Do You Have to Report?
Tips for Tax Success Before You Use a Professional Tax Preparer
What Determines Tax Withholding Amounts?
What Is the Disability Tax Credit (DTC)?
When to Hire an Accountant to do your Taxes
Why are my support payments taxable?
Where Does Our Tax Revenue Go?
Let’s Get Ready for Taxes!