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Tax time!

It never fails to sneak up on you: Tax time! Whether it’s your personal taxes in the spring or your corporate fiscal year end, getting your books together is a hassle. Follow our guide below to stay on track and make your tax filing as smooth as possible.

First, your accountant needs your business.

The first thing your accountant needs from you is an appointment. By mid-February, you should have already contacted your accountant to be sure they can process your file this year. If they can’t, you’re going to need that lead time to find a new one. Accountants do all the same things regular people do like get sick, sell the business, and retire. This is why it’s prudent to check-in with yours and make sure you’re both on track for this year’s file.

Second, your accountant needs you to reconcile your books.

Since you have already contacted your accountant (right?!), they have provided you a Profits & Loss form (P&L) or given you instructions on how to give them access to your cloud bookkeeping platform. Bonus Tip: If they haven’t, look for a new accountant! In both instances you need to have entered into either the P&L or your cloud file:

  • Invoices – whether paid or unpaid, if you issued an invoice in the tax filing calendar year, they go in the tax file.
  • Pay stubs – if you pay yourself a salary or you pay additional staff, all of that has to be included.
  • Receipts and bills – every receipt that pertains to your business goes into the file, including but not limited to: office supplies, machinery, property, vehicles, gas, meals, internet, cell phones, marketing expenses, travel expenses – if you pay for it and use it for work, add it to the pile.
  • Kilometres – If you claim the use of your car for business use, you need to include the number of kilometres you traveled for work.

 

If you are a Sole Proprietor you also include receipts from medical care not covered by insurance, any donation receipts, investment income statements, property purchases, and everything else you would include on a personal tax return. Because this IS your personal tax return.

Incorporations need to include any shareholder transactions (investments and withdrawals), HST payments, HST claims, dividends, bank statements, and all of your bookkeeping records.

Bonus tip: Make your tax filing easier still with cloud accounting. Just enter in your information into the database as it comes throughout the year then grant your accountant access to prepare your file.  OR, even easier, subscribe to a digital filing cabinet like Hubdoc and let the pros do the rest.

Finally, your accountant needs a little bit of your time.

Your accountant will likely need at least an hour of your time, divided up, to sign releases, fix bookkeeping errors, plan for the year coming and the like. Factor travel time on your part into that.

Your accountant may seem like a superhero, but at the end of the day they are mortals just like you, so you won’t be able to deliver your tax file to them the day it’s due and meet your deadline. But you called ahead and got a realistic timeline from them a month ago, right? Be realistic about the timing, start reconciling early, and tax time will become routine instead of a hassle.

Ready to find out what the fuss is about cloud accounting? Call UpSide Accounting from anywhere in Canada to get steered in the right direction by calling (226) 214-3233.

MikeWiddis No Comments

Why Should I Care About Sole Proprietorship vs. Incorporation?

When you start your own business in Canada it’s easy to get overwhelmed with paperwork and protocol, especially when you’re a staff of 2 and you’re mopping your own bathroom floor. One of the decisions you’ll have to make ASAP is whether to strike out as a sole proprietor or incorporation. Unfortunately, you don’t even know what that means. We can help you with that!

The terms Sole Proprietorship and Incorporation refer to ownership. The government gives you 4 options to choose from when declaring to the Canada Revenue Agency (CRA) who is responsible for your business. However, as a small business owner you really only have to worry about the first two (the others are Partnership and Co-operative).

Sole Proprietorship

If you are the sole proprietor of your business, then you own it all. If this were Middle-earth you’d be wearing that one ring. You file 1 tax return because your business taxes ARE your personal taxes. You don’t have to sign legal documents to declare yourself (aside from your tax file). There are few formalities and all the power.

Entrepreneurs who choose to go the sole proprietorship route experience unique benefits. These include, zero incorporation fees, an instant start date, and total control. The only people you report to are your clients and the CRA (and the law, of course).

The downside of a sole proprietorship links directly with the benefits. You are entirely responsible for the business. That includes incurred debt and lawsuits that may come your way via creditors or clients. You also may end up paying more in taxes if your revenue puts your income into a higher bracket.

Choosing to run as a sole proprietorship depends on what your business is. If yours is a low-risk, not-pouring-all-my-life-savings-into-launching kind of service, then you might feel comfortable operating solo. Artists, designers, writers, and similar freelancers typically begin as sole proprietors and stay that way until they get burned. Or rather, they earn enough revenue to use incorporation as a taxable advantage.

Incorporation

By incorporating your business you are registering as a company with the Canadian government which opens doors for you both financially and legally. As soon as the ink is dry on the paperwork, your life savings are protected from lawsuits and debt incurred by your company (with a few exceptions). You can also apply for corporate loans and grants. Although your taxes become more complicated, your personal taxes won’t be as…well, taxed.

Incorporation costs between $800 and $2800, which includes paying government fees, as well as the optional fees for the accountants and lawyers to help assist with the filing (like Upside Accounting!). It does not include additional fees you may pay to file your taxes every year, the bookkeeper you may want to hire, etc. Incorporating after you’ve run as a sole proprietor will likely cost you a little more, but can be done.

The decision to choose between sole proprietorship and incorporation lies with you. We have now outlined the basic differences between the two. This is information is meant to inform you on the concepts to help you know you have options and what they consist of. On top of that, now if a buddy at the next BBQ you go to starts talking about it you’ve got a clue!

For more detailed information on sole proprietorship and incorporation and how they apply specifically to you, get in touch by calling Upside Accounting at 226-214-3233 or contact us here.