As a business owner, you have a lot to worry about already. From overseeing marketing strategy decisions to short and long-term planning, you’re always dealing with business-critical tasks. This makes it easy to put aside something as seemingly mundane as your business tax returns. But, the reality is, tax strategy should be at the very heart of your planning and financial decision- making.
If you aren’t focusing on tax planning and preparation throughout the year, you could be missing opportunities and throwing away money. Don’t put your business taxes on your ‘I’ll-do-it-later’ to-do list. Here are the three business tax returns mistakes you definitely want to avoid.
Overlooking Some of Your Business Deductions
The Canada Revenue Agency (CRA) allows businesses to deduct all expenses incurred in the process of earning a business income. What a lot of business owners do is write-off the big things – huge capital investments, legal fees, employee benefits. And then they leave out all the dozens – or hundreds – of small expenses because they didn’t keep track of their costs.
The truth is, these little expenses add up. From membership fees to all the trips you have your employees take to the office supply store down the street to buy more printer ink and pens, you should keep track of everything so you can claim all your expenses. In the end, a few dollars here and there can add up to thousands of dollars in deductions.
Not Having the Right Proof for Meal and Entertainment Costs
You may know you can claim a partial deduction for business lunches, the holiday party you put on for your employees, or the wine you bought for a charity dinner. But, unlike other business expenses, with meal and entertainment costs, you’ll need to have more than a basic receipt to justify the deduction.
The CRA expects an explanation of why these costs are related to your business and necessary. So, whenever you pay for food or entertainment for a business-related event, it’s a smart habit to make a record of who was there and what business matters were discussed.
Ignoring Taxes Until Tax Time
Yes, your tax return isn’t due until the spring, but that doesn’t mean taxes shouldn’t be on your mind all year long. Business taxes can become extremely complicated with so many deductions and filing requirements. In order to optimize your tax returns, it’s important to have a tax plan in place for the entire year.
This will help determine when you should make business investments, and you’ll be less likely to overpay or to miss deadlines. With professional tax preparation, you can avoid all the expensive pitfalls of business tax returns such as penalties, errors, and missed opportunities.
And, thinking ahead and creating a strategy can also help you budget for your taxes ahead of time so you’ll know about how much you’re likely to pay and how much to have set aside.
Business taxes are way too complex to leave until the last minute or to handle without a plan. At Leonard Tam, we can help you with professional tax preparation and planning. Book a meeting today to learn more and to ensure you avoid these common mistakes.