1. Register for GST before you are required to
Doing this gives you the opportunity to claim your input tax credits (ITC) for the amount you paid in GST/HST for your business. This makes any sales tax you paid on business related items non-representable as a real cost to your business. You lose this benefit if you wait to register until you are required to.
2. Incorporate Your Business
Corporations are generally eligible for lower tax rates than personal tax rates. If you’re in a position to leave cash in the business, you can defer the higher, personal tax liability until you remove cash from the business. However, corporate taxes are more complex than personal taxes so your accounting fees may be higher.
3. Business Expenses
Keep vigilant track of your business expenses, doing this allows you to deduct them as such, therefore lowering your overall income tax payment. This can apply to lunch meetings, gas for commute to and from meetings, any equipment you require, and anything else that is directly applicable to the development of your business.
4. Company Accounts
In the same area as business expenses, having separate company bank and credit cards will help streamline that process. It can be a pain sorting through past receipts and online transactions trying to figure out which were business expenses and which were domestic. Using a company card will help avoid errors and allow you to keep a closer eye on your total corporate spending. This will also keep you more accountable for excess spending for the company. If you are needing to keep to a certain budget that you’ve laid out in a financial plan, you are less tempted to fudge numbers and pretend you still have a margin. Keep your company card as such, strictly business!
5. File on Time
Any late filing with CRA is susceptible to penalties, these are easily avoidable by, you guessed it, filing on time. While these may seem like idle threats, it can be a significant chunk of money to a budding business and should not be laughed off. For example, penalties for payroll remittance delays is 10% of the remittance if the payment is only 7 days late. Late GST filing is 5% of balance owing plus 1% per additional month that it is late, with the same basis on penalty for corporate taxes. It is safe to say that it’s worth staving off procrastination to save your company some money.
6. Choosing you Year End Date
A neat trick you can do to ease your stress is carefully selecting your fiscal year-end date. CRA allows your to choose a fiscal year-end within 53 weeks of the date of incorporation. You can defer your first corporate tax bill if you push your fiscal year back. For example, if you incorporate your business in June, and select a calendar year-end, you will have to pay corporate taxes that following March, if you qualify for the small business deduction. However, if you choose a fiscal year-end at the end of the month you incorporated (June), you will not have to pay corporate taxes until 3 months after that date, in this instance, the following September. There are other important things to consider when choosing a year-end so it is important to discuss considerations with your accountant beforehand.
This year, don’t stress about your corporate taxes, keep the important deadlines written out and placed where you can see it every day. Whether you are doing your taxes yourself, or going through an accountant, as the leader of a company it is your job to be aware of your tax situation. There is absolutely no reward for putting off tax filing, but following these tips, could help reduce your tax obligations, and allow a relaxing tax season.