Use this List to Identify Easy Tax-Savings Strategies for Your Business
By Marc Henein
As another year finishes, Canadian business owners need to take stock of their income, deductions and credits for the current year in order to take the necessary steps to minimize their tax liability. Use this list to identify easy tax-saving strategies for your business.
By December, you should have a fairly good idea of your income and expenses for the year. Prepare a projected income statement now to get a handle on your year-end situation. If you discover your business will incur a substantial tax liability, a “heads-up” warning can give you an opportunity to do something about it before the end of the fiscal year.
You can speak with your accountant to talk about these options to help minimize taxes before it’s too late.
- Be generous with gifts.
It’s the perfect time of year to make a sizable contribution to a charity. Give to registered charities and get a written or electronic receipt for your tax records. Your business will receive a 75% tax credit of the donation amount applied to taxable income.
To determine your charitable donation tax credit, visit this online calculator supplied by the Canada Revenue Agency (CRA).
Be sure to consult with your accountant or bookkeeper when deciding whether to donate money personally or through your business in order to understand the tax implications.
- Make strategic purchases.
If it looks like your income will be high for the year, and you have some extra cash, consider making some business-related expenditure before December 31.
High-cost items such as software, staff training, advertising or office supplies will increase expenses and therefore decrease taxable profit for the year. As it’s the time of year to celebrate your staff and thank your customers, be sure to keep your receipts for any end-of -ear entertainment expenses.
- Defer income to the next year.
Another strategy for reducing taxable income may include billing customers after December 31. Receiving income in January instead of now is a simple strategy to reduce your taxable income for the year. Be sure to speak with your accountant or bookkeeper to see if this strategy is an option for your business.
- Maximize savings when you hire family.
You do all the little things right to reduce the taxes you have to pay and free up more money for your business. So when your installments are due, be sure to pay on time to avoid penalties and interest-rate charges on late amounts due.
- Shelter your income from tax.
If your spouse works for your business, you can pay them a reasonable salary which can later be deducted as a business expense. Just be sure to treat your paid family members like any other employee – have a contract agreement that outlines their job and salary, and keep any documentation the CRA might want to see that supports their work hours.
By following these simple suggestions you’ll increase the likelihood of a healthy tax return – and avoid any unpleasant surprises from the CRA next spring.
Marc Henein is a Senior Wealth Advisor for Scotia Wealth Management. Marc Henein joined ScotiaMcLeod in 2004. Working in partnership with the client’s tax and legal professionals, Marc manages portfolios focused on capital preservation and tax efficient income generation. In some of Marc’s spare time he writes Investment and Financial Planning related articles for the Globe & Mail to share some of his knowledge which has helped many Canadians with their Wealth Management. Marc graduated from Wilfrid Laurier University and has stayed involved as President of the Wilfrid Laurier University’s Alumni Association. He has achieved some of the highest designations within the Investment and Financial Planning Industry. He has obtained Chartered Financial Planner (CFP) designation, is a Fellow of the Canadian Securities Institute (FCSI) and the Chartered Professional (Ch.P.) Strategic Wealth designation. Marc can be reached at 905.896.6452 or [email protected] or www.marchenein.ca.
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