Useful Tax Tips for small Businesses

Business losses can be deducted against a business owner's personal income to reduce taxes. If a business owner's losses exceed personal income for the year, some of the year's business losses can be used to reduce taxable income in future years. Please note that loss utilization rules are different for corporations.

The following tax tips will ensure that CRA is not getting more than its fair share of taxes:

  1. Writing it off
  2. Business losses
  3. Combine business trips with personal travel
  4. Buying or selling a business
  5. Keep Tax Documents for at Least Six Years
  6. Quick, quick, quick
  7. Income splitting
  8. Come clean with the Canada Revenue Agency (CRA)
  9. Self-employed or employee?
  10. Capital Cost Allowance (CCA)


Writing it off

Individuals may deduct all expenses incurred in the conduct of their business, provided they are undertaken to earn income, are reasonable under the circumstances and not limited or prohibited by rules for some specific expenses per Income Tax Act.
Business losses

Business losses can be deducted against a business owner's personal income to reduce taxes. If a business owner's losses exceed personal income for the year, some of the year's business losses can be used to reduce taxable income in future years. Please note that loss utilization rules are different for corporations
Combine business trips with personal travel

If your reasons for taking the trip are related to your business, if the costs claimed are reasonable and you have allocated a portion for any personal expenses and if, ultimately, the result was that you earned income as a result of making that trip, it may be possible to deduct eligible travel expenses.
Buying or selling a business

There are really only two options: to buy/sell the assets of the business or to buy/sell the shares of the company that runs the business. There are tax advantages to both—find out which option is best for you.
Keep Tax Documents for at Least Six Years

Failing to keep proper books and records is an offence under the Income Tax Act. And keeping poor records could prevent you from benefiting from valuable deductions. There are cases where what might otherwise have been legitimate expenses were disallowed because of poor, or non-existent documentation.
Quick, quick, quick

Certain businesses can use the quick method of accounting for the GST—it is possible then to calculate your remittance without having to record the GST separately on your sales.
Income splitting

If a spouse, common-law partner or other family member is employed by your business, whether it be incorporated, a partnership or sole proprietorship, there are potential opportunities for income splitting and reduction of the family’s overall tax burden.
Come clean with the Canada Revenue Agency (CRA)

The Voluntary Disclosures Program (VDP) allows taxpayers to come forward and correct inaccurate or incomplete information or disclose material they did not report during previous dealings with the CRA, without penalty or prosecution.
Self-employed or employee?

Benefits and tax deductions will vary drastically depending on whether the CRA views you as an employee or self-employed.
Capital Cost Allowance (CCA)

Individuals who run their own business cannot write off the cost of capital assets (automobiles, furniture, computers, etc.) immediately upon purchase; rather they must spread the cost over several years. For tax purposes, this write-off is referred to as capital cost allowance (CCA) and it is subject to strict rules and limitations.
Please contact us for further details on any of the above items and we will be happy to assist you and your business.