What Unincorporated Small Business Owners Need to Know about Filing Their Taxes
Being a small business owner comes with challenges, not the least of which is doing your taxes. While most Canadian taxpayers have relatively simple tax returns that can easily be completed using software, small business owners have the additional burden of reporting details relating to their businesses. This can seem onerous, but understanding what needs to be done, and when, can significantly help reduce the stress and ensure that the tax filing process is smooth and straightforward.
One of the types of income on which you pay income taxes is what Revenue Canada (CRA) refers to as “income from self-employment” that is essentially the same as income from a small business. If you do have business income, then you are required to declare your business income on a tax return. As an unincorporated small business owner, this business income is reflected on a separate schedule on your personal tax return. The schedule is called a T2125, which is a “statement of business activities” (discussed below) and at minimum requires that you show any income you earned from a business venture. If you have incurred expenses to earn the business income, you may also deduct these from your gross revenues or sales to arrive at net income from business. Unlike a simple personal tax return with no business income, the information that must be reported on a T2125 is generally not simply provided to you on a tax slip, such as a T4 or T5, but must be compiled and calculated.
12 Tax Tips for the Self Employed
The self-employed lifestyle holds great promise when you first start being self employed, however you quickly find yourself doing things that you would never have dreamed of. You are expected to take on role of salesperson, market researcher, accountant, lawyer and social media expert, while not getting paid for any of it. Your available funds do not allow for outsourcing and at times you are not even aware of what you don’t know. Luckily the internet provides a wealth of tips and tricks to make these tasks easier, and you might actually find that you enjoy taking on some of these challenges. Ensuring that you keep on top of your finances and tax obligations is among the most important of these tasks for which it is essential to have a system in place so that you can maximize tax deductions, minimize taxes payable and reduce amounts that you have to pay to CRA and RQ.
What Small Business Owners Need to Know About Income Tax Instalments
Transitioning from being a full time employee to small business ownership or self employment means that you need to cultivate self discipline. You can no longer rely on your employer to take care of business functions that do not relate to your job ,and must take a much more active role in ensuring that you remain on top of your obligations whether it is collecting payments from customers, paying bills or ensuring that you do not run afoul of Revenue Canada. One of these obligations requires that you pay your own income taxes, which you are required to pay when you file your income tax return. Additionally, once you exceed a certain income threshold you are also required to pay income tax and sales tax instalments.
9 Tax Facts about Charitable Donations for Individuals and Small Business Owners
Every good act is charity. A man's true wealth hereafter is the good that he does in this world to his fellows. - Moliere. Unfortunately, the Canada Revenue Agency (CRA) has specific criteria for what qualifies as a charitable donation and not all good acts qualify for a tax benefit. Growing a moustache (although not without its costs) or running a marathon, are generally not considered to be a charitable donations according to the tax code. Luckily there are a multitude of charitable organizations that do qualify the donors to receive a tax credit for their donations. Some facts about the tax credit are discussed below: