15 Tax Tips for 2015
Do you feel like 2015 is going to be a great year for your business, one where you’ll reach your goals?
Hope always springs eternal when Jan. 1 comes around, and this year is no different. However, many Canadians aren’t as optimistic about reaching their goals as they’ve been in the past.
At least according to a new survey from CIBC that asked 1,000 respondents if they felt confident about accomplishing their goals over the next 12 months. Roughly 66% said that they did, which is a majority, but more than 10% less than the results of the same poll from 2014.
As a business owner, your main goal is likely to perform better financially. One of the best ways of accomplishing that is by earning money in new and different ways, whether that’s by improving your services or products or something more administrative, like taking advantage of tax deductions and minimizing your liability.
“Here are 15 tax tips to make 2015 a year of financial success.”
The following are 5 of 15 tax tips that you should aim for in 2015. By being conscientious about them, you could reach your financial goal before the year is over, bolstering your confidence by proving you have what it takes to accomplish your goals.
1. Minimize Your Errors
No one is perfect. You’re bound to make mistakes in your dealings with customers or employees. But one area where you can hone your flawlessness is when you file your taxes in April.
These mistakes are often times the simple ones, such as forgetting to write your social insurance number or writing down the wrong sequence of numbers. You may also make an error when doing calculations.
Tax filing software can help minimize these errors, but they can only correctly quantify the numbers that you input. So if you enter the wrong data, you’ll get a wrong result. Make sure you double check what numbers you’re calculating so filing isn’t longer than it has to be.
2. Don’t Miss Out on Deductions
Talk to any tax specialist, and they’ll likely tell you that the biggest reason why business owners and consumers don’t see a bigger refund is because they overlooked deductions, not realizing that they were even available.
Some of the more common ones can include an employee’s moving expenses if you or your company were involved in a worker’s relocation, losses from theft or embezzlement, office supply expenses and charitable donations.
3. Keep an Eye on the Calendar
There are several big tax dates that you should be mindful of as a business owner, not all of them occurring in the spring. Of course, the big one is April 30. As a small business owner your filing deadline is June 15; however, any income taxes owing are due April 30 to avoid any interest or penalties.
There are other dates to pay attention to as well, for things like payroll, income tax installments and other tax requirements for corporations (GST/HST). CRA has an app to help small business owners remember tax-related deadlines.
4. Take Advantage of Seminars
Speaking of the CRA, throughout the year, it offers free seminars to both individuals and small businesses, helping them learn about topics such as income taxes and GST/HST. They’re usually available in most provinces so be sure to check in your area.
5. Stay Abreast of Tax Law Changes
Every year brings new updates and changes to tax laws. These are usually announced by the government. Though they can be complicated to understand, monitor the CRA’s website, which announces tax law changes when they happen. Your FBC tax specialist can help you understand what they are and whether they affect you and your company.
6. Don’t Make Assumptions
As the days turn into weeks and weeks months, you’re likely to purchase a number of items for your business, be them large or small. In doing so, you may buy on the assumption that you’ll be able to write it off as a business expense, thus lowering your tax obligation.
But it’s important not to assume that everything you buy will be tax deductible. Tax laws are always changing, so something that may have been deductible last year may not be in 2015.
In short, if you’re making a major purchase, consult with your FBC tax professional so you can determine for certain what’s deductible and what isn’t.
7. Beware of Scams
“The CRA NEVER requests passport or health insurance information.”
It’s a sad state of affairs that people try to take advantage of others, but that’s unfortunately a fact of life.
The Canada Revenue Agency reminds both individuals and businesses to be wary of telephone calls and email that purport to be the CRA, asking for social insurance numbers, bank account numbers or other personal and financial information.
These correspondences claim to be the CRA, but requesting this type of personal information is, in itself, a red flag. When in doubt, ask yourself some common sense questions, like whether the claim is too good to be true, if the information being requested is unusual and if there is a legitimate reason for the email or phone call.
The CRA has more information on scams, but you can talk to an FBC tax specialist as well.
8. Consider Donating to Charity
Charitable donations are one of the most selfless gestures a person or business can make. But if there are tax deductions that can be taken advantage of, this further incentivizes donating generously to a worthy cause.
The Government of Canada in 2013 introduced the first-time donor super credit, which increased the value of charitable donation tax credits by 25% and a one-time 40% federal tax credit for monetary donations of $200 or less. Though this is something that’s exclusively for individuals, there are tax benefits for businesses as well. Your FBC tax specialist can fill you in.
9. Be Mindful of Bonuses Affecting Tax Liability
Your employees will acknowledge that there’s never a bad time to give them a bonus for all the hard work they’ve done.
Traditionally, though, bonuses are handed out at the end of the year as a way to say thank you for their efforts. Be careful that you don’t wind up increasing your tax obligation as a result.
For example, if you increase their pay during a pay period, that’s considered taxable income that must be substantiated when it’s time to file, meaning payroll taxes are affected. Instead, you may want to hand out gift certificates, which are non-taxable in certain circumstances.
10. Avoid Audit by Being More Vigilant
Few things are more unsettling than being audited by the government.
Unfortunately, declining revenues have led to more audit enforcement actions, often leaving businesses with thousands of dollars less than they’d anticipated.
You can avoid being affected by an audit by always tracking your expenses, double-checking your records to ensure they correspond to one another and using an organized storage system that allows you to call up records with ease.
11. Deductions on Furniture
You may have found a lot of furniture stores advertising sales events on various office furniture, be it desks, couches, lounge seats or executive chairs. If you’ve been planning on upgrading your office’s upholstery, you can take advantage not only of the price discount, but tax benefits as well.
“Furniture tax deductions can be realized for several years after you make your purchase.”
There are a couple of ways in which you can take advantage of tax deductions on furniture.
Office furniture is generally considered “capital property” and you can claim depreciation over time using the capital cost allowance (CCA).
Talk with an FBC tax specialist for their opinion on the best option for you and your business.
12. Health Insurance May Be Tax Deductible
Insurance is another deduction that you could benefit from. For example, if you provide health insurance for employees, you can deduct the premiums from your business income.
Just keep in mind that the deduction you make can’t be more than your company’s net income for the year.
13. Don’t NOT Pay Taxes
This ought to go without saying, but if you’re even contemplating the possibility of not filing taxes, don’t. The risk just isn’t worth it. The Minister of National Revenue announced recently that the government of Canada is cracking down on tax evaders and avoidance.
“Our Government is committed to protecting the revenue base by ensuring that all Canadians meet their tax obligations,” said Kerry Lynne Findlay, Minister of Revenue, in a recent press release. “These new measures will help crack down on international tax evasion and aggressive tax avoidance and ensure our tax system remains fair for all Canadians.”
Since 2006, 62 taxpayers have been convicted of tax evasion, producing court fines of $12 million and more than 700 months of jail time, according to the CRA.
14. Take Advantage of Online Tax Resources
There are many tax resources available online. The Government of Canada updates tax law changes for business owners on a regular basis, and there are also tax calculators that you can use, including an income tax calculator at TaxTips.ca. Your FBC tax professional can help you figure out how to use them and also point you toward other worthwhile websites.
15. Don’t Miss Tax Deadlines
April 30 will be here before you know it, which is the last day you have to file your personal taxes if you owe money to the government. As a self-employed individual your filing deadline is June 15; however, if you have taxes owing it must be paid by April 30.
For a corporation, the tax return must be filed no later than 6 months after the end of the fiscal year of the corporation.
Miss any of these tax filing dates, and you face a penalty of 5% of the unpaid tax plus 1% for each month the return is late.