The tax season is usually a stressful period for many people especially the small business owners. Many of them will not have done their bookkeeping all year long and will be scrambling to find their receipts and expenses to account for everything done for the past year.
Here are useful tips that will guide you through the stressful tax season and as you hand over your books to a tax return preparer.
a) File for an extension
You should give yourself enough time to compile all your financial documents before handing them over to your tax preparation specialist. It is important to grant yourself adequate time since you may not know how long the process might take.
You should not wait until the last day to file for an extension for filing your tax returns. You should ensure that you have calculated all potential taxes due and sent those figures with the extension request. If you have dutifully paid your taxes, you will not have to worry about an extension.
In the occasion that your income has increased over the past year or your expenses have been lower than expected, then you have to pay up the owed amount to avoid penalties and interest upon paying up your taxes.
b) Compile all your fiscal records
You will require all documentation for the business expenses, income, purchases, transaction records, receipts, bank statements, paid bills, and canceled checks.
Some small business will put some of their expenses on their personal credit cards. The documentation to capture such expenses should be provided so that all business costs are captured.
c) Sort and categorize financial documents
After collating all financial documents, they should be sorted and categorized with the different business expenses places separately such as the home office expenses, medical expenses, auto expenses, utilities, office supplies, and charitable contributions.
The categorization helps your tax accountant to access all the right figures, feed them into a spreadsheet and run the necessary calculations. It will help figure the deductions that you may be eligible for.
d) Ensure all income is documented
A source of trouble for many small businesses is tracking income. You need to be very accurate when you give a figure to your tax accountant. The Canada Revenue Authority will not care if you declared all your expenses but will pursue you after failing to report your income appropriately.
After the deadline is past and you have filed your returns, you should seek to find a way of maintaining your financial records in a better way to avoid landing in a similar situation in the next year.
Envolta encourages small business owners to carry out a little book-keeping each day to ease the filing of tax returns. The bookkeeping systems adopted vary but what is important to use a chosen method on a daily basis. To learn more about our tax preparation services please visit https://envolta.ca/services/tax-preparation/ or call us at (613) 567-7088.
For more financial resources visit Business Guide Ottawa.