FBC [ebook] 7 Big Mistakes Small Business Owners Make At Tax Time

© Farm Business Consultants Inc. (FBC) http://www.FBC.ca
7 Big Mistakes
Small Business
Owners Make
at Tax Time

Copyright © 2013
Farm Business Consultants Inc. (FBC)
All rights reserved. No part of this book may be reproduced, stored in a
retrieval system, or transmitted in any form or by any means, electronic,
mechanical, photocopying, recording, scanning, or otherwise, without the
prior written permission of the publisher.
Disclaimer
All the material contained in this book is provided for
educational and informational purposes only. No
responsibility can be taken for any results or outcomes
resulting from the use of this material.

96 Years of Temporary Taxation
If tax stuff interests you, check out our
[Infographic] “The Canadian Tax Landscape –
96 Years of Temporary Taxation” detailing how
far we’ve come since the first personal and
corporate taxation occurred in Canada during
World War One.
For the full [Infographic], click here:
http://www.fbc.ca/blog/96-years-temporary-
taxation-canada-infographic

Preface
With over 20,000 farm and owner/operator small businesses served by
our 12 offices in Ontario, Manitoba, Saskatchewan, Alberta and British
Columbia, we know the importance of making sure you get to keep every
single penny that you’re entitled to under the laws of Canada when filing
your personal and corporate taxes.
The correct approach to deciding which strategies to follow as well as
diligence around record keeping are the two magic ingredients of any
sound financial plan for family businesses.
Last year, we saved $37M in taxes for FBC Members. If any of these
strategies seem like they might work for you, we invite you to talk with us:
www.fbc.ca/contact-us or see what a membership might look like for you
and your business: http://www.fbc.ca/tax-services/build-my-membership.
Remember, we come to you!

As a small business owner, you’re busy wearing many
hats. You don’t have time to be a tax expert, too!
Avoid these mistakes and you can master the visor:
1. Overlooking lesser known tax deductions
2. Forgetting to give credit where credit is due
3. Missing tax filing deadlines, or not filing at all
4. Commingling personal and business finances
5. Neglecting to make tax-savvy investments
6. Failing to let your family lend a helping hand
7. Ignoring government incentive programs

Mistake 1:
Overlooking lesser
known tax deductions

You probably know about many of the tax deductions
available to your business — operating costs like supplies,
advertising, office rent, etc.; meal and entertainment costs
(don’t forget the 50% rule); and auto expenses (be sure to
keep an accurate auto mileage log).
Of course, if you operate your business out of your home
you can deduct a portion of utilities, property taxes, house
insurance, and mortgage interest.
But, did you know you can write off the amortization of
assets including intangible ones such as goodwill,
trademarks, and some patents? What about writing off
uncollectible invoices as bad debt?
Don’t miss out on these deductions!

Mistake 2:
Forgetting to give credit
where credit is due

Your small business is eligible for tax credits.
For example, you can claim your input tax credits for
GST/HST paid on goods and services used in making
taxable and zero-rated supplies.
If you’re self-employed, claim CPP contribution payable on
your income. There are also investment tax credits
available on specific asset purchases.
Forgetting tax credits means money out of your pocket.

Mistake 3:
Missing filing deadlines,
or not filing at all

Surprisingly, many small business owners fail to file a tax
return or file after the deadline.
Apart from catching some unwanted attention from the
CRA, not filing a tax return means losing out on some
financial benefits. GST/HST tax credit and the Child Tax
Benefit programs are both based on declared net income.
Your tax return also creates the contribution room in your
RRSP. Of course, filing on time means never having to pay
late-filing penalties. And we all hate penalties, don’t we?
And don’t forget, even though the self-employed tax filing
deadline is June 15, any amount owing is due April 30 to
avoid interest.

Mistake 4:
Commingling personal
& business finances

So, you’re at Costco picking up some groceries and you
decide to grab some supplies for the office. You aren’t
likely to pull out one credit card for the bread and milk and
another for the paper and printer ink. But, maybe you
should. Keeping your business finances and home
finances separate is very important.
Commingling personal and business finances could lead
to overlooking a legitimate business expense or claiming a
personal expense as a business deduction.
In addition to potentially increasing the likelihood of a CRA
audit, this “piercing of the corporate veil” makes
protecting your personal assets more difficult.
Just say no to commingling.

Mistake 5:
Neglecting to make tax-
savvy investments

Taking advantage of tax laws as they pertain to
investments is a great way to save on your tax bill. Most
know the benefits of investing in TFSAs and RRSPs but
what about timing the triggering of capital gains and
capital losses of your unsheltered investments to reduce
your overall tax burden.
Did you know that you can deduct interest costs on money
that you borrow to earn business income? Even the
investment you make in your home mortgage can be made
into a tax deduction.

Mistake 6:
Failing to let family lend
a hand

Running a small business requires the support and
understanding of your family. We all know that. But, did
you know that your family can also lend a hand by helping
lower your tax burden?
By putting family members to work — and paying them a
salary — you can reduce your overall family tax burden.
You can also improve your tax situation by income
splitting with your spouse. You can invest in a spousal
RRSP, split up to 50% of pension income with your
partner, and even loan money to your spouse (or child) for
investment purposes.
And, invest in your children’s education through an RESP
and earn a government grant of up to $500 each year.

Mistake 7:
Ignoring government
incentive programs

The Scientific Research and Experimental Development
Program (SR&ED) encourages Canadian businesses to
conduct research and development (R&D) by providing
cash refunds and/or tax credits for your R&D expenditures.
The hiring credit for small business gives you relief from
the employer’s share of employment insurance by
crediting up to $1000 on the payroll account, based on the
increase in the employer’s EI premium paid in one year
over those paid the previous year.
The apprenticeship job creation tax credit is a non-
refundable tax credit equal to 10% of the eligible salaries
and wages payable to eligible apprentices to a maximum
credit of $2,000 per year for each eligible apprentice.
See, the taxman isn’t so bad after all.

fbc@fbc.ca
1.855-378-3628
www.fbc.ca
@fbcsmallbiztax

FBC [ebook] 7 Big Mistakes Small Business Owners Make At Tax Time

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FBC [ebook] 7 Big Mistakes Small Business Owners Make At Tax Time