Starting a business is hard work. In addition to creating your core product or service, you also need to have a working knowledge of many other aspects of the business. In the early stages, hiring additional staff or even contractors to handle some of these roles may not be an option and you are faced with the challenge of learning as much as possible in a short amount of time. Lack of experience and expertise makes it easy to make mistakes, especially when it comes to more technical things like accounting and taxes.
If one is able to avoid making the following mistakes or take help from accountants near me, they can save a lot of taxes.
1. Failure to declare business earnings in the tax return
Anyone earning income, whether you’re a freelancer or selling vintage clothing on Instagram or a course/pattern/digital download on your website, is required to report their net business income on Schedule 2125 of their return of incomes. While you may not consider yourself an entrepreneur, the tax authorities do and unfortunately have the final say. Of course, if you have income/sales from a part-time business, you can also claim expenses related to your small business.
Take help from accountants near me.
2. Failure to track your income and expenses
In addition to point 1, if you have a business initiative it is important that you keep track of how much you earn and any related expenses. While many micro-business owners don’t need accounting software, at least an Excel spreadsheet or Google Docs can be used to track transactions. Ideally, both income and expenses should include details such as the date of the transaction, customer/supplier name, and pre-tax amounts where applicable, and total amount paid/received. Also, expenses should be categorized so they can be easily summarized and then copied to the business section of your tax return, which requires you to list expenses by category. Seek accounting services in Canada, search for a tax accountant near me.
3. Failure to register for sales tax
Any business whose total income/sales exceeds $30,000 and whose products and/or services are not specifically exempt must register for sales tax. It’s important to note that this threshold includes sales from all sources, not just Canadian sales. So if you have two customers, one in the US and one in Canada, and you charge $15,000 to each, you still need to register and charge Canadian sales tax. Otherwise, checks and penalties can occur, which are never pleasant.
4. You don’t have a separate business bank account
One of the most common mistakes small business owners make when starting out is not keeping personal and business finances separate. They often don’t want to pay taxes, which is understandable, but the result is a mess of personal and business transactions that add up over time. Separate bank and credit card accounts for your business can greatly reduce the stress of reporting income at tax time and provide excellent insight into how your business is doing, especially when you don’t have an accounting system in place.
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5. Don’t understand the difference between working and self-employed working
It is often much easier to hire a contractor than an employee because there is much less paperwork involved. This is fine if the contractor’s work is one-off and he has other clients. The problem comes when they’re working exclusively for your company, full-time, and you’re basically their boss. In this case it is important to sign up for payroll and hire them as employees. While this may seem like a hassle, payroll staffing can be quite simple and easily outsourced for a low (high) cost.
6. Failure to keep a copy of traders and commercials
Business owners and employees often incur expenses and immediately lose the receipt. This can be a costly mistake as CRA/RQ require an original invoice or receipt in case they check you out. There are a number of services and apps that let you scan the receipt, which is a great habit because not only do you have proof of the transaction stored on your computer or in your accounting software, but you can look at it as well. Every time. Both CRA and RQ accept electronic documents if they meet certain criteria. Also, if someone does work for you, even on and off, it’s imperative that they provide you with an invoice, otherwise it may be difficult to claim it as an expense. Take help from tax accountant near me.
Bottom Line
Making mistakes is an inevitable part of doing business. It’s about how many of us learn and gain experience in the process of building a better, more resilient company. Tax filing is a complex process, so it’s no wonder taxpayers often make mistakes in their returns. Sometimes your mistake can cause you to pay more taxes than you should. In other situations, you may need to return benefits you’ve already received or incur penalties or other charges. To help you get your return right the first time.
Take help from tax accountant near me and avail quality accounting services in Canada.