As we hurtle towards the end of the year and I am in full "year-end finance/tax tips" mode (see this week’s blog post), I keenly feel (both for myself and all of you) the tedium that is associated with getting our year-end affairs in order. It can be difficult to muster the motivation to do anything when you simply want to take some time, watch mindless TV, play video games, and eat tasty food (or whatever it is that you enjoy doing during the holidays).

There are, however, some pleasures to be gleaned from administration.

As many of you might know, fixed assets such as furniture, computers, cameras, printers, large tools or something else that is specific to your business cannot be claimed all in one year as an expense. Rather you can only claim the depreciation amount based on a rate established by Revenue Canada. This is referred to as capital cost allowance or CCA.

Like so many business decisions, whether or not you should accept credit cards requires an assessment of the costs versus the benefits. The costs are easily measurable. On average, the total cost of accepting credit cards is between 1.5% and 3.5%. This means that on $1,000 of sales, you are paying between $15 and $35. Additionally, you might also be paying for equipment. This can certainly add up, depending on your sales volume.

In the context of transitioning to self-employment, whether you’re just starting out or have been doing it for a while, one of the biggest sources of uncertainty is financial. Unlike employees who receive a regular paycheck, business owners and freelancers need to be keenly aware of where their income is coming from, what their financial and tax obligations are, and how to manage their cash flow. Many promising ventures fail simply because they run out of money.

Many small business owners, understandably, don’t have finance backgrounds. That’s why they outsource their accounting and tax functions—so they can focus on growing their businesses. The problem arises when they place blind trust in their accountant/bookkeeper/ employee/ partner etc. This can lead to missed opportunities for tax savings, overlooked financial red flags, or even serious errors that could hurt the business. Not having this knowledge can also contribute to the stress that arises from uncertainty.

Having a fundamental understanding of your business’s finances is therefore essential. It enables you to ask the right questions, catch potential errors, and be more confident with your decision making.

In my experience as a small business accountant, the area that drives the most questions relates to taxes. These questions usually fall into two categories: How do I wrap my head around this? and How do I save money?

My primary goal has always been to simplify accounting, finance and tax for my clients and customers. I aim to be the kind of accountant who doesn't brush off client questions but instead attempts to explain things in plain language. You know your business better than anyone, and by working together, we can often uncover ways to reduce taxes or improve your overall financial situation.

One of the complexities of being an unincorporated small business owner is that you (or your accountant) have to compile and calculate your revenues and expenses and report the result on schedule T2125 of your personal tax return. If you are profitable, then you must pay taxes. This amount, as some of you can attest to, can be disturbingly high.

Like it or not, you’re probably getting inundated with AI-related content. Unlike the time before the internet (for those of you that remember) catching up on news meant actively reading a newspaper or turning on your TV or radio. Now, with our near constant access to emails, social media, and online news, it can be hard to escape.

According to this article, the global AI market is currently at $196 billion., This is expected to increase to $1.8 trillion by 2030. 83% of companies claim that AI is a top priority.

Many of us are reaping the benefits of AI without potentially even realizing it: from streaming services and shopping, that suggest shows/items to you based on your preferences to more comprehensive medical diagnoses and automated customer service (although arguably this has become increasingly frustrating), .

There are also a multitude of ways in which small businesses can utilize AI with minimal investment:

As someone who has been a solopreneur for many years, I have a great deal of experience with both the rewards and the challenges.

I love being my own boss, not having to deal with managing people (which is, in my opinion, a completely separate area of expertise), having flexibility in terms of the type of work that I want to do as well as the customers that I want to work with (and vacation time :)). Perhaps more importantly, I feel a great degree of gratification from my work, very much enjoy exploring my creative side and am a bit more willing to take (calculated) risks.

On the flip side, being a solopreneur can be lonely. There is an energy that comes from being in an office environment or having people to brainstorm with, that as a solo worker is difficult to replicate.

To non accountants, a write off is something that simply reduces your tax bill. If you were to tell a business owner that having a meal with a client was a write off, they would immediately understand you.

The problem is that this usage of write off, which has now entered into common parlance (not unlike decimate or literally), is not technically correct. A write off, in technical terms is not the same as a deduction or an expense. Rather it specifically relates to an asset that no longer has value or has an impairment in value.

Perhaps the most common limiting belief is that money is inherently scarce. Many of us believe that there is a finite amount of success available and that money is hard to come by. If you believe that you have to save everything you earn rather than reinvesting it in your business, it becomes difficult for you and your business to grow and thrive. This is rooted in our fears about our abilities and ultimately, self worth.

Marketing your business, whether you are brand new or experienced, is an ongoing challenge. The good news is that the number of ways in which we can get ourselves in front of potential customers has proliferated. The bad news is that an initiative, that might have been working, suddenly stops delivering results, often for seemingly inexplicable reasons. (a recent google update has significantly impacted the ranking of my blog which inspired me to write this article which is as much for me as it is for you). This means that we have keep on top of our marketing efforts, and monitor their return on investment (ROI), on an ongoing basis. Since our financial resources and time are not infinite, we want to make sure that they are as effective as possible. We also want to ensure that we do the accounting for our advertising and marketing expenses, meaningfully.

The deadline for submitting tax returns, unless you or your spouse are self employed, has passed. Many (especially tax preparers) are breathing a collective sigh of relief as the stress (often relating to simple procrastination) has largely dissipated. Of course there are still a few of you who have not yet been able to file. If you have not filed and are not an unincorporated small business/self employed, then you will be charged penalties based on the amount due. You should try and file as soon as possible as the late filing penalty is 5% immediately and then 1% every month of the balance due. Alternatively, if you can’t file, pay as much of your estimated taxes as possible to reduce the amount of penalty. If you are expecting a refund, then there are no penalties, however any support or credit payments will be help up until you file.

Below I have enumerated a list of what to expect, and do, post tax filing:

The federal budget that was released on April 17, 2024 was controversial, to say the least. For years, finance people have been hypothesizing about an increase to the capital gains “inclusion” rate. This budget finally made good on that speculation and was perhaps the most significant provision of this budget.

A capital gain occurs when you sell an asset for a higher price than what you paid for it. Of the gain that you realize i.e. the difference between the sale price and the purchase price, currently only 50% of the gain is “included” and is taxable.

It is now April and we are getting closer to the tax filing deadline. Some of us have anxiety just thinking about it and have understandably decided to procrastinate as the only reasonable response :). Of course there are those of you who have already filed their tax returns, thereby (mostly) eliminating their stress and should be commended for their judiciousness.

As I’ve been immersed in taxes (for what seems like an eternity), I have received a number of questions. I thought I would share a handful of these with you:

It is easy to get sucked into the vortex of social media. It can be a fun distraction and depending on your interests, educational and inspiring. It is also a megaphone where often the most opiniated people hold the most weight. Someone with thousands of followers who confidently asserts a fact, is taken at their word. Unfortunately, thought, some of this information is erroneous or has been manipulated to support an argument and anyone trying to correct errors or present a counter argument is shut down or simply deleted.

As we are firmly into tax season, I thought it would be useful to delve into the endlessly exciting topic of sales tax. I have several blog posts and videos about sales tax which I will link to below, including an FAQ (which I have just updated). In this article, I will provide some context that might be useful.

Sales taxes in Canada in it’s original form was introduced during the Great Depression The federal government introduced a "manufacturer's sales tax" (MST) in 1920 to bolster their revenues during a challenging time. The tax was levied on the sale of goods by manufacturers and was primarily intended to be a hidden tax, that was indirectly paid by consumers.

f you are the owner/shareholder of a small business corporation, you likely know something (and is some cases quite a lot) about dividends. As an accountant, it is one of the areas of small business tax that people ask me the most questions about. Mostly, dividends are relatively straightforward, but there are some complexities for which expert tax advice is often necessary.

A dividend is simply a reward for ownership of shares in a corporation that is represented as a payment to a shareholder, usually in cash, but sometimes in kind. Since dividends are only paid to investors, they are considered to be passive income similar to interest, rental income or gains on sale of investments. This has tax implications in the Canadian tax code in that passive income:

As we approach the deadline to contribute to RRSPs which is February 29th , I thought it would be useful to look at the potential sources that might contribute to your retirement income. For many of us, retirement seems like a long way off and consequently we perhaps don’t spend enough time thinking about it until it’s too late to make much of a meaningful change.

In my last newsletter article about RRSPs (around this time last year), I highlighted how 5,000 per year over 30 years i.e. a total investment of $150,000 invested at 5% (which is lower than the average return on the stock market) would result in $338,899.11 at the end of 30 years. This applies to all types of investments and is essentially the power of compounding which is a function of the rate of return and time i.e. the number of years the investment is earning the return. This demonstrates that contributing, even small amounts, as early as is possible, can lead to a significant nest egg.

As tax season approaches, a question that I get often is whether you should do your own taxes or outsource them to a tax preparer or accountant. My answer, perhaps unsurprisingly, is that it depends.

The first and perhaps most important factor is to determine the level of complexity you are dealing with. If your situation is simple e.g. you have a T4 slip from your employer, RRSPs and a couple of donations, it is quite easy to do it yourself especially using tax software which guides you through the process. However, if you have sold a principal residence or rental property, or have an active investment portfolio or another arcane tax event , and you are unsure of how to deal with this, it might make more sense to outsource so that you are not doubting whether you have done it correctly.