The CRA offers a list of approved tax preparation programs that you can use to help in filing returns for your business. All in all, filing taxes can be a complicated process that must be accurately done by a CPA. Throughout the year, you can take steps to prepare your company for tax returns. Let’s look at a few ways to prepare just in time to hit the deadline.
Gather All The Information Required
If you have employees in your company, gather all the information regarding their salaries and wages throughout the year. If you’re using tax software preparation programs, they’ll help you with the calculations so you won’t need to have a calculator. However, you may need a scanner to upload pay slips and other forms in the program. To make it easier for you to get this information when it’s time to file taxes, create proper structures and systems in your business that simplify record keeping. For instance, you can always ensure that the receipts and invoices are stored safely as soon as they are received and recorded in a specific place. You can also make it a rule to write some information at the back of the receipt to explain what the expense was about. These simple habits will simplify record keeping and make it easier for you to file your tax returns.
Use Simple Accounting Methods
If you choose to handle your filing without the help of a CPA, be prepared to dedicate some time and effort to this. Learn some of the strategies that CPAs use to simplify accounting and make it easier to report certain types of income. For instance, avoid using the cash method for reporting income and instead use the accrual method which allows you to report income as soon as you bill your customers. The cash method of reporting may work for certain businesses such as agents who are paid on commissions or farmers. You should also consider going through CRA guidelines to find out which method of reporting income will make your work easier when filing.
Calculate The Home-Based Business Deduction
If you run your company from home, you may qualify for several home-based business deductions. For instance, you can remove part of your expenses for utilities among other house costs from your business tax return. This is only applicable if you have a home office and you use it primarily to conduct business, meet clients and other activities that help your company generate income. Deduct part of your maintenance costs, property taxes, air conditioning costs, rent and other applicable deductions. This helps you to get the most of your business income.
Know What To Send To CRA
The CRA requires supporting documents to back up your claims. These documents include receipts, invoices, and copies of your personal information. Remember to send only copies of the originals. Also, note that you don’t have to send some other documents like T4s because the CRA can access them through their computers. If they need documents such as rental receipts, they may request them.