Tax season can be highly stressful for businesses and individual taxpayers in Canada. In 2021, tax filers reached 28.1 million, highlighting the significance of resources that can help taxpayers get ready for tax season.
This short guide can help entrepreneurs prepare their tax returns to reduce the stress come tax time. After reading, business owners will discover how to file taxes and simple tips to reduce their taxes.
1. Know Which Type Of Tax Return You Must File
The type of tax return you have to file will depend on your business’s legal structure or model.
If your business is a partnership or a sole proprietorship, you’ll report your business income on your T1 personal tax return form and through a Statement of Business or Professional Activities. Moreover, the annual deadline for filing your tax is on June 15, and you have until April 30 to pay any tax you owe from the previous tax year.
Meanwhile, you must file a T2 corporate income tax return form if your business is incorporated. If you have a corporation, the annual deadline for filing your tax is typically six months after your fiscal year-end.
2. Read Up On Tax Incentives And Deductions
Learning about tax incentives and deductions can lower your balance owing come tax season. In Canada, various tax incentives are available to businesses of all sizes in various industries.
You can also claim any qualified business expenses as deductions to reduce your total taxable income. Visit the government website for a list of operating business expenses you can claim for deductions.
Examples of expenses home-based business owners should consider are car expenses, internet bills, mortgage interest, repairs, and utilities. Meanwhile, entrepreneurs who drive to work may claim deductions for vehicle gas, repairs, and maintenance expenses.
3. Decide How To File Your Taxes
There are several ways to file a return for your business taxes in Canada. You can print your tax information and forms from the official Canada Revenue Agency (CRA) website and file the documents by mail.
Another option is to file your documents online. As of 2019, 90 percent of Canadian corporations file taxes electronically through CRA-certified tax preparation platforms.
If you are struggling to meet tax requirements for your business, you may need the help of professional tax accountants. These financial experts can help maximize deductions and help with tax planning.
They can also organize your paperwork for you. With their help, you will always have an updated trial balance for the year, making it easy to prepare and file your return come tax season. A tax accountant can also do the following tasks for your business:
- Monitor receipts and invoices
- Support tax deduction claims with proper documentation
- Prepare your business for audits
For example, Faris CPA, the best tax accountant in Toronto, helps independent professionals and small- to medium-sized businesses prepare for tax season.
The tax accountants can help protect your business from undue taxes and penalties. They are dedicated to solving tax-related challenges, which can give you the peace of mind you need even during the hectic tax season.