While we’re still a few months out from Tax Day, it’s never too early to take a look at our small business taxes. Many small business owners feel like filing taxes is overly complicated, but in fact they’re not. Here’s what you need to know to get the most out of your taxes for 2012.
1. Pay taxes on time. If you put aside money to pay your taxes throughout the year, you save yourself the headache and fees you’ll pay if you don’t pay on time. Putting the money into an interest-bearing account can help you even make a little extra on the money you save!
2. Don’t overlook tax credits. Canada has many research and development tax credits that your business may qualify for. Filing these credits on your taxes could cover up to 35% of your expenses in these categories, so it’s worth looking into.
3. Home-based businesses have deductions. You can deduct the expense you have to pay for your home office (based on its square footage), as well as office supplies (printer, paper, phone bill). Keep track of your expenses as well as your receipts so you can claim them come tax time.
4. Track your business travel. You may be eligible to claim your motor vehicle expenses on your business taxes, so keep a log of the kilometres you drive for business purposes.
5. You can get on a payment plan. If, when you file your taxes, you don’t have cash on hand to pay what you owe, you may qualify for a payment plan. Keep in mind: you may have to pay interest or other penalty fees if you take this option, but it can help to keep your cash flow healthy.
6. Having an apprentice can pay off. The Apprenticeship Job Creation Tax Credit (AJCTC) can provide you with up to $2,000 in tax credit if you qualify. If you have an apprentice in her first two years of her apprenticeship contract, you may be able to reduce the amount of federal taxes you pay.
7. Your tax year (likely) ends December 31. If you’re self-employed, your fiscal year ends when the year ends. If you are a corporation, you may elect to change your fiscal year.
8. You may be able to write off damaged or obsolete inventory. If you qualify, you can take a tax deduction for inventory that is damaged or obsolete. If the drop in the market means the value of your existing inventory has gone down, you may be eligible for additional deductions.
9. RRSP contributions reduce your taxable income. If you haven’t given much thought to contributing to your RRSP, now’s the time you should. You can deduct up to $22,970 on your 2012 taxes if you contribute to it.
10. Get help if you need it. If your business taxes are straightforward (or if you’re filing your business income on your personal taxes) and you’re comfortable filing them yourself, by all means, do. But if you’re unsure of what you can claim or you have an unusual tax situation, invest in hiring a professional. He may be able to find deductions you hadn’t considered, and you’ll minimize your chance of an audit if you work with a professional.
Get more “Tax Saving Tips for Small Business” in our free webinar, November 29, 2012 at 1 pm Eastern.
Photo: mondays child on Flickr