Running a business, whether it is online or brick and mortar, needs multiple disciplines. In simple words, if you are a business owner in Toronto, you cannot propel your finances only through sales. Let’s take, for example, bookkeeping or annual budgeting. Although these activities don’t bring in any money to your account, you won’t be able to keep track of anything without them. Similarly, tax planning is one of the vital elements of a business. It doesn’t even matter what size your business is. If you don’t plan your finance well, you may end up highly in debt without even knowing.
There is no business owner on earth, let alone Toronto, who wants to let their income go quickly into taxes. You want to hold on to it tightly when it comes to tax deductibles. And to help you save you from all the hustle, just remember that GTA accounting is an all-in-one accounting firm with office locations in Toronto, Oakville, and Mississauga. Whether your corporation needs the tax guide or you want it for your personal taxes, you need not worry because here are five tax planning tips for businesses in Toronto.
1. Original Receipts and CRA
To reduce the tax burden, you must start working way before the filing process for tax begins. A task as simple as keeping the original receipts of all your business activity comes into great use. CRA (Canada Revenue Agency) will not entertain your credit card statements but instead require you to present original receipts of your business expenses. Every business expense counts, and there is no reason to take even the most negligible expense for granted. You can also merge this receipt collection into your company’s bookkeeping and can make the whole process quite efficient.
2. Business-Use-Of-Home Expenses are a Great Tool
Suppose you are one of those small business owners in Toronto who run their business straight out of their home. In that case, business-use-of-home expenses may come in handy. To understand this model, consider that 20% of your home’s total area is the place where you operate your business. This 20% area not only includes your office space, but some areas may be for reserving some necessary goods for the business. Whatever the percentage or proportion it is, you can claim it in lieu of your home expenses. The expenses that you can deduct include:
- Mortgage interest
- House insurance
- Capital cost allowance
- Property taxes
3. RRSP and TFSA management
To make the most of RRSP, it is best to contribute when your business is in its maximum tax bracket. That way, your tax-deductible contributions will really help you save a lot in terms of taxes. TFSA is sometimes used as an alternative to RRSP when you are maxed out there. But both of these can be simultaneously utilized. RRSP and TFSA are not the same routes but still have many similarities in their nature of the operation.
4. Incorporating Your Business Also Helps
It may look like an intricate process, but incorporating your business can actually help you in the longer run. After all, tax deferrals are what we are after, and this is where you can do it. By incorporating your business, you as a business owner can make it through many forms of legal liabilities.
5. Outsourced Payroll Service
Outsourcing your payroll service to a professional accounting and taxation firm can really save you money and time.
There are many more methods that can reduce the amount you pay in taxes. To tweak with these financial technicalities, you may have to spend many hours in a corporate environment. Or there is a much simpler solution – hire a professional accounting firm and get it all done without any trouble.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.