Business Tax Deadlines for Sole Proprietors for 2021
While many businesses got a break from some onerous tax deadlines back in the early days of Covid, unfortunately there are no such extensions for 2021. Almost all tax deadlines are now exactly as they were in previous years and small business owners must adhere to them or risk facing penalties for late filing plus interest on any overdue balances. That being said, it is possible that a greater amount of taxpayer relief will be available this year if you can demonstrate financial hardship due to Covid.
I have compiled a list of deadlines for all unincorporated small business owners which includes sole proprietors and self employed individuals. You can also sign up to get a calendar of tax due dates (for sole proprietors) for your ongoing reference.
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.
3 Government Wage Subsidy Programs for Startups and Small Businesses
Budget limitations and inexperience can make hiring new employees a difficult decision for small business owners. Luckily, If you are a startup or a small business in Canada, there are numerous programs that can help you get up and running. Some programs provide help with your cash flow in the form of financing, grants, subsidies and tax credits while others provide resources such as training, mentoring and coaching. Many small businesses particularly when they are in the startup stage should take the time to research these programs and send applications to the ones that might be applicable. Below are a list of three popular programs that are worth exploring further:
Note that the programs listed below are independent of COVID. For a list of COVID related wage subsidies and tax credits, please see the Government of Canada website
How to Pay Dividends to Non Resident Shareholders
Anytime a Canadian corporation makes a dividend payment to its shareholders it is required to follow certain procedures. For Canadian shareholders, corporations must prepare a T5 dividend slip for each shareholder that receives a dividend and submit the T5s to Revenue Canada. (Similarly Quebec Corporations must issue an RL1 ). The process for issuing dividends to Non resident (foreign) shareholders who own shares in Canadian companies is different and is discussed below:
COVID-19 Details on Canada 75% Wage Subsidy for Businesses with Employees (CEWS)
Businesses who have employees that are on payroll (i.e. for whom deductions at source is being remitted and T4s/RL1s are being issued) are entitled to a Wage Subsidy of 75% of the employees’ gross payroll up to a maximum of $847 per week referred to as Canadian Emergency Wage Subsidy or CEWS. This should prove to be very helpful to businesses who don’t want to let employees go but due to reductions (or complete stoppage) of revenues may not be able to afford to pay them. It provides for business continuity and financial relief to a significant subsection of the population.
COVID-19: Financial and Tax Relief Measures for Small Business and Individuals (UPDATED)
UPDATED APRIL 27, 2020
In response to the financial pressure being felt by small business, employees and individuals as a result of COVID-19, a number of measures have been announced by governments and banks to alleviate this difficulty These are enumerated in this post and while details relating to eligibility, how to apply etc. on the measures announced by the federal government today are still forthcoming, small businesses and individuals now know what types of financial relief they may be eligible for and can start preparing accordingly.
Small Business Tax Filing Deadlines for 2019 (UPDATED)
As the year end approaches, small businesses should be aware of the deadlines, imposed by Revenue Canada and Revenue Quebec, for their various tax obligations. Ensuring that these are done on a timely basis can result in significant savings , that can be put to better use in the business , by avoiding interest and penalties. It also helps to prevent aggressive notices from revenue agencies and reduces the red flags that tend to accompany habitually late filers. Below are the deadlines that businesses should be aware of:
Impact of COVID-19 on Small Business and Their Employees(UPDATED): EI Sickness and EI Regular Benefits
Updated on March 30, 2020 for CERB which will replace the EI benefits in the short term.
The impact of Covid 19 (caused by the CoronaVirus) is being felt deeply all across the world right now as individuals, businesses, healthcare institutions and governments try to cope with the ongoing and evolving implications. It is a difficult time as individuals try not to panic and governments are endeavouring to decide the best course of action for their citizens. Small businesses are experiencing are experiencing dramatic slowdowns or are being forced to close as customers stay at home.
Businesses who have employees that are quarantining themselves due travel or potential contact with the Coronavirus as well as employees who are laid off are entitled to EI Benefits. While there have been some changes to the sickness benefits in the face of Covid 19, EI benefits currently remain the same and are explained below:
Business and Tax Implications of Owning Rental Property
A great many fortunes have been made in real estate. Conversely, as was evidenced in 2008 with the deflation of the housing bubble, many fortunes have also been spectacularly lost. Fortunes aside, owning real estate is one of the best ways to build equity. If you own your home, you are already one step ahead. With rental property, you can further augment your net worth if after investing the necessary down payment the rental income covers and/or exceeds the mortgage payment and related expenses, (Leaving you free to move on to buying your next property). This is not a decision to take lightly as with any investment there are several business and tax factors to consider before taking the plunge:
Employment Insurance for Small Business Owners and Self Employed Individuals
One of the benefits allowed employees working in Canada is that have access to employment insurance. A specific amount is withdrawn from each employees paycheques each pay period along with an employer portion and remitted to Revenue Canada. This entitles them to wage loss replacement, in the event that they are laid off, as well as other benefits. This can be extremely useful in difficult times and has been used by millions of Canadians.
Unfortunately, taxpayers who are considered self employed are not entitled to the same benefits. A self employed individual also includes anyone who owns 40% of a corporation and usually extends to family members of self employed people. By the same token, self employed taxpayers (whether they are sole proprietorships or owners of corporations) are also not required to pay employment insurance (EI) premiums.
Quebec’s Small Business Tax Deduction and How It Relates to Payroll Hours
Revenue Quebec, in the March 2017 budget (or economic plan as they like to call it) decided that a small business wasn’t a small business for the purposes of the tax deduction, unless a minimum number of payroll hours was worked by employees of the business. Initially they had wanted to impose a minimum number of 3 full time employees to qualify for the deduction, however, after realizing that many businesses had several part time employees during the year, they changed the requirement to a minimum number of hours worked to 5,500 hours per year. This could be a combination of full time and part time employees. Consequently, many businesses that had qualified for the small business tax rate were no longer eligible.
9 Tax Facts about Charitable Donations for Individuals and Small Business Owners
Every good act is charity. A man's true wealth hereafter is the good that he does in this world to his fellows. - Moliere. Unfortunately, the Canada Revenue Agency (CRA) has specific criteria for what qualifies as a charitable donation and not all good acts qualify for a tax benefit. Growing a moustache (although not without its costs) or running a marathon, are generally not considered to be a charitable donations according to the tax code. Luckily there are a multitude of charitable organizations that do qualify the donors to receive a tax credit for their donations. Some facts about the tax credit are discussed below:
What Is a Capital Dividend and How Does It Benefit Your Corporation
When an individual sells some property, investments or other assets (perhaps you have a Picasso lying around that's appreciated in value), only 50% of the gain is subject to tax. For example if you sell a rental property and realize a gain, after brokerage and expenses, of $100,000, only $50,000 will be taxable. (The actual tax that you pay will depend on your marginal tax rate at the time). The other 50% of the capital gain is a non taxable gain. For a corporation, however, this distinction is a little more complex. In order to allow corporations the same benefit as individuals with respect to capital gains and losses, the 50% non taxable portion of the gain on a corporate capital transaction is allocated to what is referred to as a Capital Dividend Account or CDA. The balance in the CDA, which is a cumulative balance over the lifetime of a corporation, is then available to the shareholders on a tax free basis.
Understanding Payroll Deductions: Personal Income Tax Rates, CPP/QPP, EI and Basic Exemption
The automation of the tax preparation and filing process has been a boon to individuals and tax preparers alike. Gone are the days of struggling to find the right box on the return, adding everything up 5 times and still getting different results, and hoping that the CRA can read your chicken scrawl. Present day tax software not only guides you through every step of the process, it also helps to optimize your allocations thereby reducing your taxes payable. There is however at least one downside to automation: Since we are more removed from the actual calculations, our understanding of our tax situation is somewhat diminished. We have an idea of what we expect to pay, which we can see every week on our paycheques (or for self employed individuals, the breathtaking moment when we see the final result on our tax return), but often we are not really sure how these amounts are derived. Below is a discussion of the tax rates, deductions and maximums to improve our comprehension of this somewhat complex topic:
Quebec Parental Benefits for Self Employed Workers
In Canada parental benefits are administered by Service Canada. Since they fall under the EI program, self employed workers must opt in tothe EI plan for self employed individuals to receive benefits. In Quebec however, unlike the rest of Canada (a common theme with Quebec), parental benefits are administered by the Quebec Parental Insurance Plan (QPIP), which does not specifically require opt in. Instead all workers in Quebec whether self employed or employees are required to pay premiums, based (similar to QPP) on their insurable earnings. For the self employed, premiums are payable at a rate of 0.86% upto maximum insurable earnings of $62,000, and are reflected in your annual tax return. As such all workers in Quebec are eligible for Parental Benefits.