Are Canadian SMBs paying more than they should in taxes?
Spring is in the air, and so is tax season, a time when we resent the taxman a little bit more.
When it comes to taxes, everyone has an opinion. Some feel Canadians pay too much, while others say we’re doling out too little. Whatever your opinion is, it’s likely that you’re trying to pay as little in taxes as possible, which can mean applying for tax credits, grants and deductions – or perhaps not declaring that $250 you earned under the table for some freelance work.
Due to the complex tax code, a lack of organization and the fear of being audited by the Canada Revenue Agency (CRA), a large number of taxpayers and businesses tend to pay more in taxes than they should. For SMBs, it is already a struggle to own and operate a business because of high tax rates and excessive red tape.
However, lack of preparation throughout the entire year can certainly lead to an abundance of errors.
“The key to minimizing tax payments is to plan early, and give the issue ongoing attention throughout the year. SMB owners should treat their taxes like any other business practice. Rushing to meet the deadline could result in errors such as incorrect postal codes, missing signatures, and incorrect social insurance numbers,” said Nancy Harris, Vice President and General Manager, Canada, Sage North America, in an interview with B2BNN.
“Some small business owners might be making costly mistakes by not realizing some of the deductions they are entitled to. Small deductions like travel, gas, meals, entertainment or office supplies incurred for business purposes can add up quickly.”
At the same time, declaring too much on a tax return can turn heads at the CRA. If a company claims 100 percent business use of a vehicle, includes a very large deduction or perhaps even utilizes a tax-free savings account (TFSA) as a business account can also lead to suspicion and the much dreaded audit.
Honesty is the best policy, says Pierre Normandeau of Talbot & Associates, and if you make a mistake then a business should consider a voluntary tax disclosure, writing a letter to the CRA with an amended return or simply sending an amended letter via online or mail.
To avoid sending an erroneous tax return, Harris suggests accounting preparation software. “It is essential to keep proper track of business records because you can’t deduct what you can’t document,” added Harris. “I recommend an accounting software solution, which can help small businesses keep an electronic record of all expenses that will have a tax impact, enabling them to easily record, track and reconcile expenses.
Indeed, neglect and ignorance are ingredients to a recipe of a higher tax rate in 2015, and can impact a company’s revenues, quarterly earnings and its overall bottom line.
What are some of the tax credits that SMBs should consider? According to Normandeau, there are quite a few federal and provincial credits available for SMBs to collect this tax season. He says that small businesses are likely unaware of the Apprenticeship Job Creation tax credit, the Manitoba Co-op Education & Apprenticeship tax credit and employee grants.
Also, the Scientific Research and Experimental Development (SR&ED) program is another area that very few businesses take advantage of. “They should be asking their tax advisors if they could qualify for any of these grants and credits,” said Normandeau.
As Nancy Harris says, “Tax time can be stressful for business owners.” It doesn’t have to be if your small business simply prepares for it and performs the necessary research. Why pay the taxman more than your business has to to?
Latest posts by B2BNN Newsdesk (see all)
- The Important Qualities That Loan Officers Need - January 21, 2021
- The Twitter Debate: Does size really matter? - January 21, 2021
- Understanding Instagram hashtags to grow your business. - January 21, 2021