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167 Tax Tips for Canadian Small Business: Beat the Taxman to Keep More Money in Your Business, 2nd Edition

167 Tax Tips for Canadian Small Business: Beat the Taxman to Keep More Money in Your Business, 2nd Edition

Stephen Thompson

ISBN: 978-0-470-67834-3

Jan 2010

256 pages

Select type: E-Book


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"...a book for every Canadian in a small or home-based business who is struggling with complex tax rules and regulations."
—Dale Ennis, Canadian MoneySaver

"...easy-going style and avoidance of the more mind-numbing details make for a solid primer on the perks and pitfalls of self-employment. tips in the appendix are probably worth the price of admission alone."
—Gordon Powers, The Globe and Mail

" of the better books I've seen on the market for small-business owners and better yet, it's all Canadian content."
—Linda A. Fox, The Toronto Sun

As a small-business owner or a home-based entrepreneur, you have lots of questions about taxes, but very few answers. Fortunately for you, 167 Tax Tips for Canadian Small Business contains a wealth of tax planning advice and strategies to help you save on your business tax bill. So whether you want to do it yourself or reduce what you pay your accountant - not to mention the government - this is how you'll keep more money in your pocket, where it belongs.

  • Packed with tax tips that will save you hundreds, or even thousands, of dollars year-round.
  • Written in a question-and-answer format that's easy to understand, practical, and easy to apply.
  • Features 167 "Tax Beaters" - quick-reference tips that highlight key points - plus three bonus tips to help you save even more!
  • Explains how to save taxes in every aspect and at every stage of your business.
  • Features a Year-Round Tax-Planning Calendar.
  • Coverage includes: business start-up, corporate tax planning, GST/HST, deductibility of home and automobile expenses, what to do if you are audited by the Canada Revenue Agency, CPP and QPP deductions for self-employed entrepreneurs, and much more.

The ultimate "tax coach" for every Canadian in a small or home-based business, this book will help you to beat the taxman at his own game!

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Year-Round Tax-Planning Calendar xi

Preface xv

Acknowledgements xix

Round 1 – Get Off to a Good Start 1

What Is a Business? 1

Should I Keep My Losses Low in the Start-Up Years? 6

When Did My Business Start? 7

What Types of Expenses Can I Deduct? 8

Am I Really Self-Employed or Still an Employee? 8

Round 2 – Keep Accurate Records—and Save! 11

Why Should I Take the Time to Keep Records? 11

For How Long Do I Have to Keep My Records? 13

What Information Should I Keep? 13

What If I Don't Get a Receipt? 14

What If There Is No Description on a Receipt? 15

How Can I Develop a Simple Record-Keeping System? 15

How Do I Know If I Made Money? 21

Can I Use the Cash Method for Reporting Business Income? 22

What Is the Cash Accounting Method? 22

What Is the Accrual Accounting Method? 23

Do I Have to Use Accrual Accounting throughout the Year? 24

Round 3 – Start with the End in Mind 27

Must I Have a December Year-End? 27

Why Would I Want a Non-December Year-End? 28

Should I Have a December or a Non-December Year-End? 28

What Happens If I Elect to Have a Non-December Year-End? 29

What If This Is My First Year in Business? 30

How Can I Minimize the Non-December Year-End Tax Problems? 32

When Can I Choose a December Year-End? 34

What Year-End Should I Choose for My Corporation? 34

Round 4 – The Tax Rate Stairway: Easy Steps to Saving Money 37

How Do I Use the Tax Rate Stairway to Save? 38

What Are the Income-Splitting Techniques? 39

The Family Income-Splitting Technique 40

The Personal Income-Splitting Technique 52

The Corporate Income-Splitting Technique 57

Round 5 – To Incorporate or Not? A Taxing Question 61

What Are the Common Business Structures That

I Can Use? 61

What Is a Sole Proprietorship? 62

What Are the Advantages of a Sole Proprietorship? 62

What Are the Disadvantages of a Sole Proprietorship? 63

What Is a Partnership? 64

What Are the Advantages of a Partnership? 64

What Are the Disadvantages of a Partnership? 65

What Is a Corporation? 65

What Are the Advantages of a Corporation? 66

What Are the Disadvantages of a Corporation? 66

What Tax Savings Can Be Achieved By Using a Corporation? 67

Is There a Tax Advantage to Selling Shares of My Corporation? 70

Should I Take Advantage of the Capital Gains Exemption Now? 71

Can I Increase the Capital Gains Exemption? 73

Can I Take Advantage of the New Enhanced Dividend Rules? 74

How Do the New Dividend Rules Work? 74

How Do the New Dividend Rules Impact My Business? 76

So Which Structure Is Best for Me? 77

Round 6 – GST: Friend or Foe? 79

What Is an Input Tax Credit? 79

Do I Have to Register for the GST? 80

Should I Register for the GST? 82

Can I Simplify the Administration of the GST? 83

Can I Still Claim Input Tax Credits If I Forgot to File My GST Return? 87

Can I Be Denied a Legitimate Input Tax Credit? 87

How Can I Verify That One of My Suppliers Is Registered for GST/HST? 89

Can I Claim an Input Tax Credit on Capital Purchases? 90

Can I Claim an Input Tax Credit on an Asset Purchased Before I Registered for the GST? 90

Can I Claim Input Tax Credits on Personal Capital Property? 91

Can I Claim Input Tax Credits on Personal Vehicles? 92

Can I Claim Full Input Tax Credits on All General Business Expenses? 94

Are There Any Other Restrictions on Claiming Input Tax Credits? 95

When Do I Have to File My GST Return? 96

When Are the GST Returns Due? 97

What Happens If I’m Late in Filing My GST Return? 98

What Happens If My Customer Doesn’t Pay His Account? 100

What If I Offer My Customer a Discount for Early Payment or Charge Interest on Late Payments? 101

Do I Charge GST on the Sale of Used Capital Assets? 102

What Happens If I Give a Customer a Gift or Free Product or Service? 102

What Happens If a Customer Provides You With a Deposit? 103

What Is the HST? 103

Do I Have to Register for the HST? 104

I Reside in a Participating Province. How Will the HST Affect My Business? 104

I Reside in a Non-Participating Province. How Will the HST Affect My Business? 105

Round 7 – 365 Days to Save 107

When Is My Tax Return Due? 107

Why Should I File My Tax Return on Time? 108

What Are Tax Instalments? 109

Do I Have to Make a Tax Instalment? 110

When Are the Tax Instalments Due? 110

Why Should I Make Tax Instalments? 111

What Are My Instalment Options? 112

What If I Miss a Tax Instalment? 116

What Is the Penalty for Forgetting to Remit Employee Deductions on Time? 117

When Are Employee Remittances Due for Filing? 118

When Are Employee Information Returns Due for Filing? 120

What Is the Contract Payment Reporting System? 121

What Fines and Penalties Are Tax Deductible? 122

How Can I Maximize My Deductible Interest? 124

Can I Deduct the Cost of Life Insurance? 125

As a Self-Employed Entrepreneur Can I Deduct Health and Dental Premiums? 125

As a Self-Employed Entrepreneur Can I Deduct CPP/QPP Contributions? 126

How Much Can I Deduct for Meals, Beverages, and Entertainment Expenses? 127

Can I Deduct the Costs Associated with Entertaining Clients at a Club, Camp, Lodge, Yacht, or Golf Course? 129

Can I Deduct the Cost of a Meal Before or After a Round of Golf? 130

Can I Give a Tax-Free Gift to My Employees? 131

How Can I Maximize My Tax Savings on the Courses I Take? 132

What Are the Tax Results If I Pay for an Employee's Training? 133

How Can I Maximize My Tax Savings on the Conventions I Attend? 134

Why Is Some of My Business Advertising Not Tax Deductible and How Can I Ensure 100% Will Be Deductible? 135

What Are Some Year-End Tax-Saving Tips? 136

Round 8 – Home Sweet Home 139

Am I Eligible to Deduct Home Expenses? 139

How Do I Calculate the Home Expense Deductions? 140

What Kind of Home Expenses Can I Deduct? 141

Are There Any Limitations on Deducting Home Expenses? 142

Can I Claim Moving Expenses? 143

What Moving Expenses Can I Deduct? 144

Do I Need to Keep Receipts? 145

Are There Any Restrictions to Claiming Moving Expenses? 147

Round 9 – Capital vs. Expense: A Wealth of Distinction 149

What Is a Capital Expenditure? 149

What Is Capital Cost Allowance (CCA)? 152

Are There Any Special Rules in the Year of Purchase? 152

What Happens When I Sell an Asset? 153

Do I Have to Claim Full CCA? 154

Is There a Right Time of the Year to Purchase Assets? 155

Is There a Right Time to Sell Capital Assets? 156

How Can I Save Tax Dollars with Capital Assets? 157

Can I Deduct the Cost of a Personal Asset That Is Now Being Used in the Business? 160

Can I Claim CCA on Assets Used Only Part of the Time in My Business? 162

Should I Claim CCA on My Personal Residence? 162

What Is an Eligible Capital Expenditure? 163

Can I Deduct Eligible Capital Expenditures? 163

Can I Deduct My Own Goodwill? 164

Am I Taxed on the Goodwill I Sell? 164

Round 10 – AUTO-matic Savings 165

What Automobile Expenses Can I Deduct? 165

What Is Considered "Business Travel"? 168

Can I Deduct the Cost of My Car in the Business? 168

Are There Any Restrictions on Lease Costs? 172

Can I Deduct All Interest Charges on My Vehicle? 173

Should I Own My Passenger Vehicle in My Corporation? 174

How Can I Reduce the Amount of the Standby Charge? 176

If I Own My Car Personally How Should the Company Reimburse Me for Business Travelling? 177

Round 11 – Saving by Spending 179

What Is an Investment Tax Credit? 180

Who Can Claim Investment Tax Credits? 180

How Do I Claim an Investment Tax Credit? 181

What Expenditures Qualify for SR&ED? 182

What Are the Tax Benefits of Claiming SR&ED? 185

How Do You Claim a SR&ED Tax Benefit? 187

How Long Do I Have to File the SR&ED Forms? 187

What Happens When I Receive the Refund? 188

What Is the Apprenticeship Job Creation Tax Credit? 189

What Is the Investment Tax Credit for Child Care Spaces? 190

Round 12 – Surviving a Visit from the Taxman 193

What Happens After I File My Tax Return? 193

What If I Disagree with the Notice of Reassessment? 197

Should I Pay Tax That Is Under Dispute? 199

What If I Have Discovered an Error in a Prior Year's Tax Return? 199

Is There Any Relief If I Have Never Filed a Tax Return or Did Not Report All of My Income? 201

Can Penalty and Interest Charges Be Reduced? 203

What Are Some Do's and Don't's If I Get Audited? 204

Round 13 – And the Winner Is... 207

Quick Reference to Tax Beaters 209

Appendix 221

Index 227