Frequently Asked Questions About GST/HST By Business Owners

Frequently Asked Questions About GST/HST By Business Owners

For those of you who are starting a new business, it is essential to know your tax obligations.  Every business owner must report their net profits on a either their personal tax return if they are unincorporated or a corporation tax return if they are incorporated.

In addition to income tax, it is essential to consider whether or not you should register and collect GST/HST and provincial sales taxes.  There are a variety of questions around this topic:

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How to File Your GST/HST Return Using CRA My Business Account
Business Tax, Tutorials Ronika Khanna Business Tax, Tutorials Ronika Khanna

How to File Your GST/HST Return Using CRA My Business Account

As of January 1, 2024 Revenue Canada will require all business (except for a handful of exceptions such as some financial institutions and charities) to file their returns electronically. This means that you can no longer use the paper form. The good news is that it is quite easy to file the return online and, in most cases, probably saves you time since you don’t have to put it in an envelope, affix a stamp and take a walk to a mailbox.

In this post, I will be reviewing how to do it via CRA My Business Account. Please note that this tutorial is for simple GST/HST returns. If you have more complex transactions, that I don’t discuss here and you are not sure, I recommend speaking to an accountant.

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How to File T4s using Quickbooks Desktop
Accounting, Small Business, Business Tax Ronika Khanna Accounting, Small Business, Business Tax Ronika Khanna

How to File T4s using Quickbooks Desktop

For all Canadian businesses that have employees on their payroll, the deadline to file your T4s is February 28th,   The good news is that it has become much easier to prepare and submit the T4s particularly if you are submitting them electronically..  The Canada Revenue Agency (CRA) is encouraging businesses to file the T4s electronically and it should be noted that e-filing is mandatory for employers with more than 50 employees.  

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Frequently Asked Questions About Salary and Dividends by Owners of Corporations

Frequently Asked Questions About Salary and Dividends by Owners of Corporations

As an accountant and small business financial consultant,  one of the most common areas of confusion and questions by small business corporation owners revolves around how to pay themselves and if one way is preferable to another.  I have addressed some of them in my blog posts on the factors to consider when choosing salary or dividends and the types of ways to structure your remuneration .  There are however specific questions that common up frequently:

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How to Pay Dividends: Completing the T5 Slip and Summary
Self Employed, Small Business, Business Tax Ronika Khanna Self Employed, Small Business, Business Tax Ronika Khanna

How to Pay Dividends: Completing the T5 Slip and Summary

If you are the owner of a Canadian corporation, you can choose to pay yourself (and other shareholders) dividends instead of a salary. Alternatively, some shareholders also take dividends in addition to a salary depending on their tax planning strategy. If you do decide to pay yourself dividends, it is important to ensure that you prepare the proper documentation for Revenue Canada (CRA) and if you live in Quebec, Revenue Quebec (MRQ) since this must be reported as investment income on your personal tax return in the calendar year in which the dividends are paid. If you are paying dividends to a Canadian shareholder, you must issue a T5 slip while non resident shareholders receive an NR4 slip. The T5 dividend slips are generally due by February 28th of the calendar year following the year in which the dividend was paid Although no income taxes are due at the time of filing the T5 slips with the government, interest and penalties apply for late filing . The process of submitting preparing and submitting the dividend declarations and the documents that need to be filled out and returned to the CRA and MRQ are discussed below:

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Guidance on Filing the RL1 Summary and CNESST Salary Declarations
Regulatory/Legal, Business Tax Ronika Khanna Regulatory/Legal, Business Tax Ronika Khanna

Guidance on Filing the RL1 Summary and CNESST Salary Declarations

The first important year end deadline for corporations, with employees, is the end of February. Salary declarations including T4 and RL1 (in Quebec) slips and summaries have to be filed with CRA and RQ. While there are numerous payroll software that handle the filing of the T4 and RL1 slips, the RL1 summary is usually left to the employer (and/or their accountants) to file. While a T4 summary is not specifically required if slips are filed electronically, an RL1 summary regardless of the method of filing the RL1 slips i.e. manually or electronically. Additionally, employers in Quebec also have to prepare a year end declaration for CNESST which is Quebec version of workers compensation. As someone who has filed numerous slips, declarations and summaries for clients over the years, I have enumerated some tips on preparing these documents::

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What is the Difference Between Zero Rated, Out of Scope and Exempt and how do you choose in QBO?

What is the Difference Between Zero Rated, Out of Scope and Exempt and how do you choose in QBO?

In QuickBooks Online (QBO), the terms "Zero Rated," "Out of Scope," and "Exempt" refer to different classifications of transactions for GST/HST and QST (in Quebec). Each one of these transactions results in $0 tax being added to the transaction, and if you use them interchangeably it is probably not a huge problem. That being said, there are a couple of reasons you might want to ensure that you get this right:

  • ensure accuracy in their books

  • avoid the small possibility that an a government (Revenue Canada) auditor might nitpick at it or

  • make your sales reports more accurate

The differences between the three classifications, which despite their somewhat technical names, are actually not that complicated.

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What Unincorporated Small Business Owners Need to Know about Filing Their Taxes
Business Tax, Small Business, Self Employed Ronika Khanna Business Tax, Small Business, Self Employed Ronika Khanna

What Unincorporated Small Business Owners Need to Know about Filing Their Taxes

Being a small business owner comes with challenges, not the least of which is doing your taxes.  While most Canadian taxpayers have relatively simple tax returns that can easily be completed using software, small business owners have the additional burden of reporting details relating to their businesses.  This can seem onerous, but understanding what needs to be done, and when, can significantly help reduce the stress and ensure that the tax filing process is smooth and straightforward.

One of the types of income on which you pay income taxes is what Revenue Canada (CRA) refers to as “income from self-employment” that is essentially the same as income from a small business.  If you do have business income, then you are required to declare your business income on a tax return.  As an unincorporated small business owner, this business income is reflected on a separate schedule on your personal tax return.  The schedule is called a T2125, which is a “statement of business activities” (discussed below) and at minimum requires that you show any income you earned from a business venture.  If you have incurred expenses to earn the business income, you may also deduct these from your gross revenues or sales to arrive at net income from business.  Unlike a simple personal tax return with no business income, the information that must be reported on a T2125 is generally not simply provided to you on a tax slip, such as a T4 or T5, but must be compiled and calculated.

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Know Your Small Business Tax Deadlines For 2024

Know Your Small Business Tax Deadlines For 2024

As we approach the new year, it will be time soon to start working on everyone’s favourite activity i.e. getting your tax stuff in order :) . Below are the deadlines that all small businesses need to know for 2024.

Download our free Canada unincorporated business tax deadline calendar for 2024 (both Federal and Quebec).

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How to Enter Opening Balances in QBO Using a Journal Entry
Quickbooks, Small Business, Self Employed, Accounting Ronika Khanna Quickbooks, Small Business, Self Employed, Accounting Ronika Khanna

How to Enter Opening Balances in QBO Using a Journal Entry

There comes a time for many small businesses or self employed workers when they decide that their current accounting system is no longer working for them. This can be stressful as learning any new software is often tedious and more importantly you have to ensure proper continuity and a smooth transition.

Small businesses might decide to transition to a new accounting software for a variety of reasons:

  • You are currently using spreadsheets which have become difficult to manage

  • Your spreadsheets do not provide the data that you require to properly analyze your business

  • Your current accounting system is too technical and/or not user friendly

  • Your current accounting system does not have the features that you require

  • You want to be able to access your data online rather than through your desktop

See our detailed review on whether QBO is the right online accounting software for your small business

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10 Tips for Setting up Your QBO File for the first time
Accounting, Small Business, Self Employed, Quickbooks Ronika Khanna Accounting, Small Business, Self Employed, Quickbooks Ronika Khanna

10 Tips for Setting up Your QBO File for the first time

The idea of using an accounting software can be a bit intimidating for some new business owners. Others are put off by the cost when a simple spreadsheet is both free and easy. In some cases a spreadsheet makes sense when you have a simple business with very few transactions per year. However, if your business requires you to invoice your clients and customers , you want to be able to analyze the performance of the business and your time is at a premium, the monthly cost of an accounting software can be well worth it.

Quickbooks Online (QBO) is the most popular software used by small businesses. And while QBO has its pros and cons that should be evaluated before signing up, once you have decided to go ahead with it there are certain best practices that should be followed when setting up your file.

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Is QuickBooks Online the Right Accounting Software for Your Small Business?
Accounting, Quickbooks Ronika Khanna Accounting, Quickbooks Ronika Khanna

Is QuickBooks Online the Right Accounting Software for Your Small Business?

The search for accounting software can be a confusing and overwhelming process. A Google search for “small business accounting software” yields over 250 million results. Trying to get recommendations from other business owners often results in passionate discussions about why a particular program is great while another one is inadequate and lacks functionality. Your accountant might point you in the right direction, but will sometimes recommend a program that they are comfortable with using, but might be too technical and not necessarily be the best solution for your business. With so many choices out there, it can be difficult to know what to do.

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Guidelines For Deducting Conference and Training Expenses
Small Business, Self Employed, Business Tax Ronika Khanna Small Business, Self Employed, Business Tax Ronika Khanna

Guidelines For Deducting Conference and Training Expenses

Attending conferences and investing in ongoing training can be a great way for small business owners and the self employed to keep current on industry developments, ensure ongoing professional development and improve their skills.  It also allows for networking opportunities and occasionally includes trips to exotic locations, which can be a welcome change in environment from working at your office.  As an added bonus ,the cost of conferences, conventions and seminars as well as corresponding travel expenses are deductible against your business income, subject to specific guidelines.

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A Guide to Navigating Taxes in the Gig Economy

A Guide to Navigating Taxes in the Gig Economy

In a recent study by H&R Block, nearly 28% of Canadians reported taking on a side hustle in the “gig economy” to boost their income. This is a significant increase from 2022 in which the analogous percentage was 13%. This is likely a result of inflationary pressures and the expansion of opportunities available for flexible work.

The gig economy, popularized by Uber, refers to work that is flexible and usually incorporates digital apps or platforms. 

Gig workers tend to be independent contractors who usually decide when they are going to work, often bring their own “tools” (such as a car or a computer) and are required to report their earnings to tax authorities.

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