Tax Filings for A Typical Canadian Small Business

As a small business owner in Canada, you need to file an income tax return every year to be able to run your business smoothly. However, filing taxes is not easy and requires the owner to file and prepare a lot of documents to get the maximum benefit in the form of tax deductions. Depending on how your business is structured (sole proprietorship or partnership), you must file the income tax form. To help you out, we have prepared a small brief about filing income and personal tax return for a Canadian small business.

Deadline for Filing Taxes

The business owner/owners need to pay their taxes six months after the corporation's fiscal year-end. Supposedly, the corporation's fiscal year-end is Jan 31; then, the taxes need to be filed latest by July 31. If there are any payments due to non-payment, etc., you need to pay those taxes two months after the end of the corporation's fiscal year.


If a business is a Canadian controlled private corporation, then there is an exception to this rule in case the annual income is less than $500,000. In such a case, the payment of the taxes is supposed to be done after three months of the fiscal year of the corporation.

·    For a partnership and sole proprietorship, the income tax is to be filed under the T1 personal income tax form. This T1 income tax return package includes a statement of business or professional activities and Form T2125 that you, as a business now, can use to report your business income. It is so because, as the sole business owner, your business is also represented as an individual only.

·        If the business, on the other hand, is incorporated, then the income tax return is to be reported on a different form which is the T2 corporate income tax return form. It is so because, in this case, the business owner and the business are considered to be two separate entities. That is why the business has to complete its separate Canadian income tax return, and the owner has to file for a personal tax return separately.

·    In the case of a corporation, the business owner has to file their personal taxes under the T1 personal income tax return as a legally separate entity.

·       Before you file for your income tax return, consult with a professional accountant to understand the various Canadian income tax deductions that you can take advantage of or apply for. However, you can maximize your business income tax deductions by taking the following measures:

·       Always keep all your receipts of expenses with you. This way, you can show what the cost you are bearing for doing your business is. Even if you have a home-based business, keep track of your receipts to avail income tax deductions.

 

·    You can also visit the Canada revenue agency website to get to know more about a particular business expense that you can claim for getting an income tax deduction. There are a lot of listings on the website for legitimate Canadian income tax deductions that you can refer to and get the claim for that particular business expense.

 

·   Make sure that you understand the various rules for vehicle business expenses, advertising expenses, expenses related to travelling, and education and employment expenses of your child and spouse as a business. They are also available on the Canadian revenue agency, so make sure you check that out.

Besides this, according to the Canadian government, there are some other income tax deductions that you are granted as well. So, check them out here:

Other Canadian Income Tax Deductions

·         Capital cost allowance

·         A registered retirement savings plan


·         Scientific research and experimental development


·         Gifts to employees as Canadian income tax deductions

Where to File the Returns?

·     You can file your returns electronically by using online software programs that allow this feature.

·      You can also mail or hand-deliver the forms and the returns to the appropriate Canadian revenue agency tax centre.

 Remember that you can use either or both of the methods to file a tax return. However, if you use both methods, you will be charged with an additional filing penalty of around 1000 Canadian dollars as the additional processing cost.

Takeaway

It is always advisable to get Tax services in Canada that can help you make the most of these deductions and also help you file the income tax returns on time. This is not only going to help you save time, but you will also benefit a lot from their expertise. A professional’s seal via corporate tax services on your income tax filing forms and returns will assure the Canadian agencies that the data is accurate.

Filing for HST return online has a lot of advantages. So, make sure that you make the most of them by staying within the deadline and taking the help of a professional to claim the maximum deductions.

Location: Pickering, ON, Canada

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