20 Essential Tax Facts for Small Business Owners

20 Essential Tax Facts for Small Business Owners

Probably the most popular question posed to accountants and tax preparers (especially around this time of year) is what types of expenses are deductible. The short answer is that an expense is considered to be deductible if it has been incurred with the ultimate purpose of earning income. For example if you purchase a domain name with the intent of setting up a website to sell your goods or services, this would be a deductible expense. However, if the purpose of your website is simply a place to show pictures of your cat, this would not be considered a business and therefore not a deductible expense. Of course if your cat picture website starts to become popular and you decide that you want to actively build this business by advertising on the site or partnering up with cat product resellers, your non commercial hobby could then be considered a business. Since you now have the intent to build a business the income earned would have to be reported and expenses incurred to earn this income would be deductible.

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9 Year End Tax Planning Tips for Small Business Owners
Self Employed, Small Business, Business Tax Ronika Khanna Self Employed, Small Business, Business Tax Ronika Khanna

9 Year End Tax Planning Tips for Small Business Owners

For numerous people around the world, the end of this year cannot come soon enough. It has been an unprecedented few months, the effects of which will be felt for many years to come. And while it has been extremely difficult for some small business owners such as restaurants and storefront retail, others have seen their businesses flourish. e.g. toilet paper manufacturers, Amazon and Zoom. Many businesses were able to pivot their business models to provide goods and services that cater to the “new normal” in interesting and creative ways. Some started selling masks while others increased their online course offerings. Beleaguered restaurants started expanding their delivery menus and offerings. To a dispassionate business analyst, this year has been somewhat fascinating and will provide a great deal of data to economists and analysts alike in the years to come.

It is time for business owners everywhere to start contemplating some end of year tax planning tips to not only ensure that they can maximize their tax deductions and reduce taxes payable, but to streamline the tax filing process in the New Year. Even if you are incorporated and your year end date is not December 31st, it is a good time to take advantage of calendar year deadlines for personal tax planning purposes.

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Self Employed, Small Business, Business Tax Ronika Khanna Self Employed, Small Business, Business Tax Ronika Khanna

10 Corporate Income Tax Facts for Small Businesses

There are essentially two types of tax returns for small businesses and the self employed.  If you are an unincorporated sole proprietor or a partnership, you are required to fill out the statement of business activities (T2125) on your personal tax return also referred to as the T1.  If you are incorporated, then you are required to complete a corporate income tax return referred to as a T2.  (The corporate tax return is in addition to the personal tax return).  Although the accounting for unincorporated and incorporated entities is almost the same, except with respect to the equity sections, preparing the T2 is more complex and is generally best outsourced to a qualified accountant.  Regardless, it is good to have an understanding of some of the important considerations when preparing a corporate income tax return.
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