A few simple steps can make your tax calculations easier.
If you run an unincorporated business in Canada---either a sole proprietorship or a partnership---just a few tax tips can save you money, time and frustration. Tips useful for all businesses include keeping good records, investigating what tax deductions and credits you may be eligible for, and obtaining tax information efficiently.
Separate Records for Each Type of Business
Separate records are required to be kept for each type of business that a self-employed person maintains. A "Statement of Business or Professional Activities" must be prepared for each type of business. For example, an unincorporated marketing specialist should keep separate records for providing online marketing services and for organizing in-person events.
Simple Record Organization System
Dropping off several shopping bags full of receipts, invoices and bank statements to your tax specialist during tax season will cost you money for preparation of your return. It also will likely cause you to miss out on important tax credits and deductions. A system as simple as putting each week of receipts, invoices and other records in a separate, labeled envelope and dedicating an hour a week to entering this information in a record book will greatly reduce the time your tax specialist spends preparing the tax return for your unincorporated business---and the fee you are charged.
Computerized Accounting
Keeping electronic records using either a simple spreadsheetor business accounting software---such as Quicken or Quickbooks---has several advantages for unincorporated businesses in Canada. Electronic record-keeping streamlines tax-return preparation. It lets you create reports that can help you calculate GST/HST remittances, tax credits, tax deductions, and the often-confusing "capital cost depreciation." You should consult your tax specialist on the legal requirements when keeping electronic records.
Business Use of Home Tax Deduction
You can claim as a business tax deduction a percentage of your rent, mortgage, household maintenance, property taxes and utilities if you use part of your home for business. The space must be used to earn income and must be regularly used as the main place of business. For example, a freelance photographer could deduct expenses for office space even if he or she takes photographs outside the home---as long as the darkroom, business accounts and digital image processing are located or conducted in the home. (See References 4)
Revenue Canada Online
All business-owners in Canada can access their Revenue Canada account online. The "My Business Account" service provides access to GST/HST, income tax, excise taxes, payroll and a software application to prepare T4 slips. You must register at the Canada Revenue Website---on the "My Business Account" page---for an ePass to access the My Business Account services. (See References 5)
Revenue Canada Business Centre's Services
Call the Revenue Canada Business Centre (800-959-5525) when you have questions about your taxes or business record-keeping. They can provide you with almost instant access to information and guidance on all tax tips and information for unincorporated businesses in Canada, including GST/HST and ordering forms.
