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.
Guidance on Deducting Home Office Expenses
One of the benefits of having a home based business (for freelancers, self employed contractors and small business owners) is that you can deduct the expenses relating to the space that you use to work. This can result in a reduction in your tax bill for costs that you would incur regardless, which is certainly an incentive to being your own boss.
Criteria for Deductibility:
For home office expenses to be deductible, they have to meet the following criteria:
It has to be your principal place of business i.e. you cannot deduct home office expenses if you have another office that relates to your business, elsewhere, even if you work 22 hours a day or you check your blackberry in bed.
The space designated as your home office is used to earn business income and/or you meet clients or customers on a regular basis. You can deduct expenses relating to the workspace in your garage which is used for home improvement projects.
How to Stay on Top of Your Tax Obligations
As an accountant I frequently receive panicked calls from business owners who have received ominous letters from the tax authorities requesting that overdue tax returns be immediately filed. Others receive notices of assessments for estimated taxes payable if they have an overdue tax return. Revenue Quebec, particularly will often send corporations or individuals assessment for several thousand dollars to scare people into filing their returns. In more extreme circumstances, the tax authorities have the power to freeze your bank accounts or initiate tax audits. This can be debilitating to a small business.
How to File T4s using Quickbooks Desktop
For all Canadian businesses that have employees on their payroll, the deadline to file your T4s is February 28th, The good news is that it has become much easier to prepare and submit the T4s particularly if you are submitting them electronically.. The Canada Revenue Agency (CRA) is encouraging businesses to file the T4s electronically and it should be noted that e-filing is mandatory for employers with more than 50 employees.
What is the Difference Between Zero Rated, Out of Scope and Exempt and how do you choose in QBO?
In QuickBooks Online (QBO), the terms "Zero Rated," "Out of Scope," and "Exempt" refer to different classifications of transactions for GST/HST and QST (in Quebec). Each one of these transactions results in $0 tax being added to the transaction, and if you use them interchangeably it is probably not a huge problem. That being said, there are a couple of reasons you might want to ensure that you get this right:
ensure accuracy in their books
avoid the small possibility that an a government (Revenue Canada) auditor might nitpick at it or
make your sales reports more accurate
The differences between the three classifications, which despite their somewhat technical names, are actually not that complicated.
How to Enter Opening Balances in QBO Using a Journal Entry
There comes a time for many small businesses or self employed workers when they decide that their current accounting system is no longer working for them. This can be stressful as learning any new software is often tedious and more importantly you have to ensure proper continuity and a smooth transition.
Small businesses might decide to transition to a new accounting software for a variety of reasons:
You are currently using spreadsheets which have become difficult to manage
Your spreadsheets do not provide the data that you require to properly analyze your business
Your current accounting system is too technical and/or not user friendly
Your current accounting system does not have the features that you require
You want to be able to access your data online rather than through your desktop
See our detailed review on whether QBO is the right online accounting software for your small business
10 Tips for Setting up Your QBO File for the first time
The idea of using an accounting software can be a bit intimidating for some new business owners. Others are put off by the cost when a simple spreadsheet is both free and easy. In some cases a spreadsheet makes sense when you have a simple business with very few transactions per year. However, if your business requires you to invoice your clients and customers , you want to be able to analyze the performance of the business and your time is at a premium, the monthly cost of an accounting software can be well worth it.
Quickbooks Online (QBO) is the most popular software used by small businesses. And while QBO has its pros and cons that should be evaluated before signing up, once you have decided to go ahead with it there are certain best practices that should be followed when setting up your file.
Is QuickBooks Online the Right Accounting Software for Your Small Business?
The search for accounting software can be a confusing and overwhelming process. A Google search for “small business accounting software” yields over 250 million results. Trying to get recommendations from other business owners often results in passionate discussions about why a particular program is great while another one is inadequate and lacks functionality. Your accountant might point you in the right direction, but will sometimes recommend a program that they are comfortable with using, but might be too technical and not necessarily be the best solution for your business. With so many choices out there, it can be difficult to know what to do.
A Guide to Navigating Taxes in the Gig Economy
In a recent study by H&R Block, nearly 28% of Canadians reported taking on a side hustle in the “gig economy” to boost their income. This is a significant increase from 2022 in which the analogous percentage was 13%. This is likely a result of inflationary pressures and the expansion of opportunities available for flexible work.
The gig economy, popularized by Uber, refers to work that is flexible and usually incorporates digital apps or platforms.
Gig workers tend to be independent contractors who usually decide when they are going to work, often bring their own “tools” (such as a car or a computer) and are required to report their earnings to tax authorities.
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.
16 Common Financial and Tax Mistakes That Affect Your Small Business’ Bottom Line
Starting a business is hard work. In addition to creating your core product or service , you also need to have a working knowledge of numerous other facets of business including marketing, IT, accounting and operations . In the early stages cost constraints may prevent you from hiring additional staff or even outside contractors to handle some of these roles may not be an option. Consequently, you are faced with the daunting task of having to learn as much as possible in a short period of time. And although there is a great deal of information available via an internet search, it is easy to overlook something or make mistakes given a lack of experience and expertise or simply the right questions to ask. This is especially true with respect to the more technical aspects of business such as accounting and tax.
Accounting and Tax Treatment of Computer Hardware and other Fixed Assets
Investment in capital items such as computers, furniture, equipment and cars can cause confusion for small business owners. Since these are purchases that affect the cash flow of the business, it seems that they should be accounted for as expenses similar to office supplies or rent. There are however special rules for any acquisitions that qualify as “fixed assets”. A fixed asset, simply speaking, is an acquisition that provides a long term economic benefit to the business. In other words, any business purchases that has a useful life that extends beyond one year, will usually qualify as a fixed asset. Below I discuss the accounting and tax treatment of fixed assets.
Excel for Small Business Owners
As a confirmed excel nerd, there is something about large amounts of data that I am inextricably drawn towards . I suppose it has something to do with an affinity for organization combined with a love of numbers and the innate desire to solve problems. As an accountant and financial consultant , I am often presented with the task of organizing and analysing data into a format that allows for greater insight into my clients businesses . And although good accounting software is important for most small business owners, especially once they reach a certain size, a great deal of analysis and reporting is done most effectively in excel.
13 Ways an Effective Accounting System Can Improve Business Decisions
An accounting system can be an extremely powerful tool for business owners. When structured with the specific needs of the business in mind, it has the power (through the magic of debits and credits) to convert data into a format that tells an interactive, completely personalized story about your business. By providing feedback on how your business is doing it allows you to understand its strengths and weaknesses which ultimately helps you to improve profitability, cash flow and growth of your business.