What Unincorporated Small Business Owners Need to Know about Filing Their Taxes
Business Tax, Small Business, Self Employed Ronika Khanna Business Tax, Small Business, Self Employed Ronika Khanna

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.

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What Types of  Car Expenses Can Business Owners Deduct
Self Employed, Small Business, Business Tax Ronika Khanna Self Employed, Small Business, Business Tax Ronika Khanna

What Types of Car Expenses Can Business Owners Deduct

Access to a car can be crucial to running a small business effectively.  Costs of ownership, however, can be high relative to your revenues, especially in the early stages when your business is not hugely profitable.  Luckily, Revenue Canada (CRA) and Revenue Quebec (RQ) allow both unincorporated/self employed individuals and owners/employees of corporations, who use their cars to generate income, to deduct the relevant expenses. Both CRA and RQ provide detailed guidance and have specific rules relating to the write off of car expenses.  I discuss some of the main provisions that impact small business owners in this article and provide guidance on the differences between unincorporated (self employed/small business) owners and corporations.

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How to Calculate Your Automobile Taxable Benefits for the Purposes of the T4 and Rl1
Business Tax Ronika Khanna Business Tax Ronika Khanna

How to Calculate Your Automobile Taxable Benefits for the Purposes of the T4 and Rl1

The majority of businesses require the use of cars and other types of vehicles to meet with clients, and suppliers, purchase goods, make service calls and of course check in with their accountants. The usage of a car is not necessarily straightforward as many employees and business owners use their vehicles for both business and personal reasons. As such, Revenue Canada has had to implement tax legislation that ensures that the personal portion of automobile usage is properly adjusted and excluded from deductible businesses expenses.

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A Guide To Preparing the T2125 For Small Business Or Self Employed Owners
Self Employed, Business Tax, Accounting Ronika Khanna Self Employed, Business Tax, Accounting Ronika Khanna

A Guide To Preparing the T2125 For Small Business Or Self Employed Owners

While being  self employed comes with numerous benefits, there are also many challenges. One of the major ones is ensuring that you are aware of, and fulfill, your tax obligations on a timely basis.  In the beginning these tax obligations can seem mystifying and somewhat overwhelming, but once you understand what needs to be done and you set up processes and reminders, it tends to become much more manageable.  This in turn reduces stress as tax deadlines approach and can result in significant potential tax savings as you keep track of all your tax deductions and avoid interest and penalties.

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What Small Business Owners Should Know about Leasing vs Buying their Car, Corporate Ownership of Vehicles and Deducting Car Expenses
Self Employed, Small Business, Business Tax Ronika Khanna Self Employed, Small Business, Business Tax Ronika Khanna

What Small Business Owners Should Know about Leasing vs Buying their Car, Corporate Ownership of Vehicles and Deducting Car Expenses

Small business owners who require a vehicle to carry on their businesses are happily able to benefit from a tax deduction relating to the business use of their cars.  Given the potential for abuse, the tax rules for deducting these expenses are fairly specific and extend to the definition of business use, types of expenses that may be claimed, methods of calculating the deduction and whether you buy or lease your car.  While the decision to buy or lease a car can be difficult enough for individuals (a Porsche is so much more affordable when you lease!), small business owners have an even harder time as the tax implications of the transaction have to be taken into consideration.
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