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Resolve to save big $$ for your small business at tax time

Trade Talks,
Kais Aziz, CA

As 2007 unfolds, this is the perfect time to make a New Year’s resolution that will benefit your business. Resolve to identify and organize your business expenses – and you could save literally thousands of dollars at income tax time. Following are some often overlooked, but very effective ways to do this.

• As you spend money each day, record your business expenses – and save the receipts.

• Remember to collect receipts for, and to claim, the following business expenses that many owners tend to overlook: automobile expenses, bad debts, books and subscriptions, cellphone, depreciation for computer, education/training, entertaining and meals, gifts, membership dues, parking, seminars, conventions and trade shows, taxi and transit fares, and travel.

• Even though you may not have receipts for incidental expenses such as parking meters or taxi fares, you may still deduct these expenses at tax time, provided they are reasonable. Where possible, keep a record of when and where you spent money in case the Canada Revenue Agency inquires.

• Prior to purchasing any major expenditures, consult with your accountant to determine the optimal strategy and timing.

• Claim capital cost allowance strategically; you can, for example, use as much or as little as you need this year and carry any unused amount forward to offset income taxes in the future.

• Review your income tax filings from previous years to identify any unused tax credits or deductions such as charitable donations or medical expenses.

• If you are self-employed, you can deduct the employer’s portion of earned income contributions for the Canada Pension Plan as well as premiums paid for coverage under Ontario’s Workplace Safety and Insurance Board.

• If you are self-employed, you may also deduct health and dental premiums paid on your behalf or that of family members who work in the business for a private health services plan.

Remember, the 2007 tax filing deadline for individuals is April 30. While the deadline for taxpayers with business income is June 15, any tax owing is still due by April 30. By resolving to implement some of these strategies, however, you might just pay less tax this year.

Kais Aziz CA, is a senior manager of BDO Dunwoody LLP (www.bdo.ca). One of Canada’s leading accounting firms, BDO helps entrepreneurs and family businesses succeed. If you have questions about this article or you would like to receive BDO’s Tax Factor newsletter, contact Kais in the Brampton office at (905) 450-6066 or kaziz@bdo.ca.