Why is it important to keep records? This is because it helps you identify the sources of your income and help you in deciding whether you should apply for a GST/HST.
With proper planning and execution, you can get decent tax savings. Reduce the balance you owe and increase potential tax refunds. Most small business owners think that they should spend all out before the end of the year to reduce their tax bill. We do not agree with that! You don’t want to spend money on things you wouldn’t originally buy to minimize your taxes. You don't want to spend $100.00 to save $30.00, that’s not smart tax planning. We can't avoid taxes, what we can do is to minimize the tax payable. Here are 4 wise business practice that will help you reduce your income taxes and get a jump on next year's tax planning.
Most of us use accounting software, and we are our own bookkeeper and tax preparers. Though, overpaying taxes is one of the biggest challenges to a small business owner’s cash flow. Consider getting a second opinion, having a second set of eyes at your tax situation can often uncover tax deductions and potentially get you a refund. Ask your tax professional to check the last 3 years of taxes, you can file amendments and get a refund if she finds new deductions that were missed from previous tax returns.
List any purchases you anticipate to make next year and consider making them before the end of the year to maximize deductions such as: • Upgrade or buy the equipment necessary for your business. • Stock up your office supplies • Pay your vendors in advance • Saving money on taxes always feels good and ensures that you're taking advantage of government-sanctioned exceptions.
Inventory only gets expensed when it's sold, but what if it can no longer be sold? Well, you can get rid of it and deduct the original cost you paid for them. The same process applies to uncollected debt, just make sure you have proper records to prove both situations. Both are not ideal for any business, but they are deductible so take advantage of it.
Small business owners have several options for employer-sponsored retirement savings plans, each contribution you make for yourself and your employees are tax-deductible. If you are running a Sole Proprietorship or Partnership, maximizing your RRSP contribution is an excellent way to reduce your taxes and save for your retirement, you can contribute up to 18 percent of your income.