Canadian Tax and Estate Planning

Ben Franklin famously said that “nothing is certain but death and taxes”. We’ve already explored how to prepare your business for future succession, in a series of posts (ownership transitions, management transitions, and formalized corporate governance), so now it’s fitting that we offer tips to help you to prepare for business taxes.

Tax-time can be particularly dangerous for small and mid-sized businesses (SMB), particularly those that are in their infancy: claiming too little can cost you in missed credits and deductions, whereas claiming too much can cost you even more in interest and penalties.

These 5 tips can keep you in line with the Canada Revenue Agency (CRA) when filing your corporate tax return:

Be Vigilant About Deadlines

Interest on money owed accrues within 90 days of your corporate year end—not when your corporate return is filed, although you have 6 months to file your corporate return. If your tax return is filed late, any outstanding fees will have interest retroactively applied to the outstanding amount.

In addition, the act of missing a key deadline itself can incur significant fines, starting from 5% of unpaid taxes plus 1% for each month outstanding.

Always Claim Available Credits and Deductions

There are many types of credits and deductions that a SMB can claim, including the Scientific Research & Experimental Development incentive (SR&ED), apprenticeship training tax credits and deductions, home-based business write-offs, vehicle expenses, and so forth.

Be sure to do the necessary research or consult with a specialist to ensure that you are claiming the credits and deductions to which you are entitled.

Deduct All (And Only) What You Can

Be sure to document all your business expenses to ensure that your deductions are accurate, and your deduction includes all appropriate expenses.

When filing deductions, be careful how you claim these business expenses; while some expenses can be claimed outright, others can only be claimed as depreciation each year based on the capital cost of the property.

Keep Accurate Records

Record keeping should be upheld year-round – don’t just put it off until your corporate year end approaches. Attempting to retroactively conduct your bookkeeping can result in missed deductions or errors that might attract the attention of the CRA.

Always be vigilant about logging expenses and keeping receipts. You should be prepared in the event of an audit of all your records and receipts for at least the past 6 years.

Good record keeping helps you to keep track of your deductions as they happen, thus minimizing potential errors, as well as offering valuable proof in the case of an audit.

Consult With an Accounting Firm

The corporate tax structure in Canada is quite complex. If your business is incorporated, you should always seek professional help from an accounting firm.

Regardless of whether or not your business is incorporated, an accounting firm with experience in your industry will be intimately familiar with the credits and deductions available to your business, and will be able to ensure that you pay as little tax as possible.

A professional accounting firm will also be able to identify and address anything in your books that may be suspicious to the CRA, reducing the likelihood that you will have to face an audit.

Contact us today to book an appointment with one of our business & corporate tax specialists.