Masone and Company

8 Most Common Queries about Small Business Taxes

Introduction

Small business owners in Canada need to be aware of how to correctly file taxes so as to avoid financial penalties.

Let’s check out some of the most common tax questions that owners of small enterprises ask our professional accountants.

Does the structure of one’s business influence the way I file taxes?

Yes, the legal structure of your business affects how you file taxes. A sole proprietor has to file their business and personal taxes on one return.

An incorporated business requires separate management of personal and business earnings and therefore both a personal and corporate tax return.

Why does one need a business number?

To set up payroll for employees To register for goods and services tax (GST) or harmonized sales tax (HST) To export or import To file a corporate tax return

Does one need to register for a GST/HST number?

You need to register in case one offers taxable property and services in Canada during his commercial activity and the person no longer qualify as a small supplier.

Despite one’s income, a GST number allows an individual to claim input tax credits.

How much of one’s income should go to taxes?

In Canada, unincorporated business owners are subject to personal marginal tax rates on their net income. You should be sure of accounting for these rates at the time of financial planning.

If you are unable to pay the amount that is payable on your Notice of Assessment, get in touch with a CRA tax service office to fix an equally acceptable payment schedule.

Does one need to pay into the Canada Pension Plan (CPP)?

Once an unincorporated business of an individual generates over $3,500, the person needs to pay into the CPP double the amount as he would have as an employee.

At tax time, one can deduct and claim a credit for the extra amount he is required to pay as an employer (over and above the amount of an employee).

If one works from home, can he expense his mortgage?

If one conducts the majority of his business from home, for example, meeting clients, he may expense a part of his mortgage.

The amount that a person may expense depends upon how much square footage his designated work space takes up within his home.

How should one claim business mileage?

One must record the exact distances that he needs to travel for business through maintaining a log. Avoid using “flat rates”.

Your claim may be denied if you trust in generalities without justification.

Does one need receipts to file taxes?

Yes, one should keep a thorough paper trail if he needs to justify his expenses to Revenue Canada (CRA).

Keep in mind that your receipts are no good unless they show that your expenditures directly contributed to generating profits for your business.

Check out our services and contact us now!

Follow Us On

Thank You