Corporate tax season is just around the corner and for many the prospect can be quite daunting – especially if this is your first time handling your business finances. One of the best things that you can do is to start preparing early. By doing this you‘ll avoid the last minute scramble and the mistakes and fines that often come along with it.
If you’re not sure where to begin, start by taking a deep breath. We have you covered with three tips to get yourself ahead of the game.
Tip # 1 – Know Your Deadlines
It’s tough to get prepared if you don’t know when you need to be prepared by. Here are a few important dates that you should be aware of in order to keep on the up-and-up with the CRA (Canada Revenue Agency).
The annual deadline for submitting your corporate tax return is six months after your fiscal year-end (which refers to the end of any twelve-month accounting period).
Keep in mind that your company’s fiscal year may vary from a calendar year, meaning that it may not close on December 31. This is because businesses have the ability to choose their fiscal year end. While many companies choose to set the date from when they first form (or “incorporate”), your fiscal year end should be formulated based on what works best for your specific business needs. Once you’ve chosen your fiscal year, though, that’s it! You have to stick with it year-to-year. This ensures that any accounting information is consistent and received within a certain time frame.
Once your taxes are submitted, and if you have anything owing, it’s important to know the timeframe that you have to pay them within.
- If you have a Canadian Controlled Private Corporation (CCPC), you must pay anything you owe within three months of your year-end.
- If your business is not considered to be a CCPC, any taxes left owing must be paid within two months of your year-end.
Another important deadline to be aware of is the one for your GST return. This date will vary depending on whether you file your return monthly, quarterly, or annually so it’s important to be in the know so you have time to save and prepare.
- If you file monthly or quarterly, the return and anything left owing are due one month after the end of the reporting period.
- E.g. a July 1-31 filing period means the return is due August 30th.
- E.g. a Jan 1 – March 31st filing period means the return is due April 30th
- If you file annually for your business, the return and any amount left owing are due three months after the end date of your reporting period.
- E.g. a June 1, 2021 – May 31, 2022 filing period would mean your return is due August 31, 2022.
Make sure you understand when your specific deadlines land to avoid late fees and penalties.
Tip # 2 – Pick A Filing Method
It’s important to decide how you’re going to file your tax return in order to get yourself properly organized. While that may seem like something that should go without saying, many business owners get indecisive when crunch time rolls around which can lead to a scramble come the end of the year.
Making the decision early will allow for you to plan appropriately and avoid the stress of trying to get something set up on the fly.
Some businesses choose to do their taxes themselves with the help of CRA-approved tax software. These programs are affordable, safe, and convenient which makes them a popular option when it comes to submitting your tax return. If you choose to go this route, make sure that the software is CRA-certified and that it supports filing in your province.
Many businesses also choose to go the route of hiring a professional accountant. This is a great option for those looking optimize their return, as a professional will offer help, insights, and guidance that software doesn’t offer. As an added bonus, you can claim tax preparation as an expense.
No matter what you choose, ensure that your paperwork is organized and complete to avoid filing delays and potential additional expenses.
Tip # 3 – Keep Organized
Resist the urge to try and get everything together at the last minute. Trust us when we say, life will become a lot easier if you don’t let your bookkeeping fall to the wayside throughout the year.
Whether you choose to do your tax return from home or want to let a professional handle it, it’s important to keep paperwork, receipts, and documentation together and organized. This will speed up your bookkeeping, save you and your accountant a lost of hassle, and will ensure that what you’re reporting is accurate (nobody likes unwelcomed visits from the CRA).
Start by making sure that you have a place to record expenses and file away receipts as soon as they happen. Avoid trying to recall things retroactively – elephants may never forget, but humans sure do! Instead, make a habit out of writing down your expenses in one place and filing away source documents like invoices, timesheets, receipts, and any other tax related documentation. Tax software, such a QuickBooks, can help you keep everything accounted for while also reducing the amount of paperwork in your office.
As well, don’t overlook the importance of keeping your personal expenses separate from your business expenses. This is a commonly made mistake that can create tax and liability issues for you and your business come the end of the year. Set up separate bank accounts and credit cards to keep your business funds completely separate from your personal funds. Use those accounts strictly for business. By doing this, you’ll have all your expenses neatly accounted for.
If you’re finding you’re too busy to keep on top of your bookkeeping, don’t worry – you are not alone. If this is the case, consider hiring a bookkeeper to keep your finances (and sanity) in check while also freeing up your time for bigger and better things.
The year end can be stressful, especially if you’re unsure what you need to claim, how to claim it, when its due, and what your business is entitled too. If this is something that you’re concerned about, book a free consultation with one of our trusted Chartered Professional Accountants today and let us help guide you through your year-end.
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If you’d like to know more about our accounting services in Chestermere, book a free consultation with one of our trusted Chartered Professional Accountants today.
