When you have been lured by the romantic concept of becoming your own boss, you will find yourself introduced to much more than you anticipated as it relates to the administrative and financial responsibilities as a business owner. For many, their first tax reporting period can be stressful – ensuring that you have compiled all the required documentation and can safely sign off on your return as complete without any errors can lead to many long hours and sleepless nights. But ensuring compliance with the Canada Revenue Agency doesn’t have to be a menacing obstacle. At Rutwind Brar, we have helped many new business owners just like you to navigate their initial tax filing with ease.
How can you avoid the pressure of the annual tax deadline and maintain the focus on your core business where your passions lie? Here are a few simple tips to help you:
Early preparation can be helpful
While many procrastinate on their tax returns each year, often finding themselves scrambling to get their personal and business returns filed by the deadline, you don’t have to wait until the last minute. As a business person, you know that the requirements are in place, so you can prepare your documentation and file your returns in advance of the deadline. At the very least, you may initiate the conversation with your accountant or tax advisor months in advance to ensure that you are thorough and ready to file with confidence
Deductions are legitimate
Depending on the nature of your business, any expense that is related to that venture may be eligible as a tax deduction. The advice of an accountant can be a saving grace in this area as they can help you to identify deductions that you perhaps didn’t realize you could claim while helping you to avoid over-reaching by including expenses that might raise red flags with the Canada Revenue Agency. Knowing how to effectively document the real costs of running your business can mean a difference of thousands of dollars to your annual bottom line.
Losses are par for the course
Most businesses report losses in their first year of operation and it is common that companies may not turn a profit for several years. While it is true that reporting annual losses year over year may seem perilous, a clear business plan which identifies your performance is on target for the long term goal should inspire confidence from the Canada Revenue Agency as well as other key stakeholders associated with your venture.
What if you owe taxes?
If business is booming, you may find yourself in a situation where you owe taxes to the government. It may seem daunting to file a return which shows that your tax bill puts you in financial difficulty as you try to keep things afloat. It is important to recognize that you can arrange payment terms with CRA that lessens the impact on your monthly cash flow and ensures compliance. If you can’t pay in full up front, know that you’re not alone and others are implementing solutions to help them address the same situation.
Getting audited isn’t really that common
Ask anyone in business what their greatest fear is and being audited is probably high on the list of worries that many entrepreneurs may identify. In truth, some statistics report that only about 1.6% of businesses ever find themselves subject to an audit. Should you find yourself in this position, the best strategy is to be open and responsive to the CRA and respond promptly to notices, providing the copies of any requested documents.
If you should find yourself facing an audit, this may be a time when you want to consult with an accountant if you haven’t already made the sound business choice to retain one to assist with your overall business accounting. A certified accountant can help you to prepare for your audit response to facilitate the best possible outcome.
Do you still have tax questions related to your new business? Our team at Rutwind Brar can help you to address your concerns about the upcoming tax reporting period and ensure that the process is as stress-free as possible. Give us a call and make an appointment to talk with one of our business tax experts.