The Giving of Gifts: December 10th, 2021

Hello All,

It is the time of year where many of us are searching for the perfect gifts for friends and family (or if you can’t find the perfect gift you just might settle on this number one Amazon bestseller). But no matter how much you enjoy the gift buying process, it is wrought with challenges that include finding something within your budget and ensuring that it is shipped on time (especially this year - see article on supply chain disruption below). Canadians also have the additional experience of finding the perfect gift and then discovering that the retailer does not actually ship to Canada or does so at exorbitant rates.

Business owners must also decide if they are going to give gifts to their customers/clients and business associates. While also having to buy gifts for your business associates can be an additional stress, there can be significant benefits in that it creates stronger relationships and brand loyalty, often for a modest cost. When a customer decides to renew a contract or place a new order, they are more likely to do so with someone who has interacted with them on a personal level. This is especially true if you were able to give them something that is meaningful and personalized. A business owner that I know would send a box of Montreal bagels to a customer in Ontario, every year, because the customer had once mentioned how much they loved them. This type of gift, which costs relatively little, can help differentiate your business and make you stand out.

It is also the time of year when many of us give to charities. This is wonderful and there is the added bonus, assuming that it is a registered charity, of being able to deduct it as a tax credit on your tax return. It should be kept in mind that to deduct a donation in 2021, the actual donation must be given by December 31, 2021. You also must have a proper donation receipt with the charity number issued by CRA.

I wish everyone, who must get gifts this year, the best of luck. And, as clichéd as it is, it is often simply the thought that counts (unless of course you are buying a gift for your spouse from the pharmacy on December 24th, 5 minutes before it closes when the “thought” might not be enough)

My latest post discusses whether giving gifts to customers is tax deductible and examines a case study in the process.

I have also included one of my more popular blog posts (especially at this time of year) that gives you some ideas for gifts for the small business owner in your life.

Small Business Articles/Tips

Supply Chain Disruptions and Inflation: Almost every business owner that I have spoken to has experienced supply chain disruptions over the past few months. The Bank of Canada believes this is likely to continue which means that inflation will continue to be a problem. The Financial Post examines this in greater detail.

Tax Tip: Most meals and entertainment expenses relating to business are only deductible at 50%. However, office parties subject to certain criteria, are actually deductible at 100%. The primary criteria to qualify for the 100% deduction is that the office party must be open to all employees. Scroll down to Section 9 of the following guidance from CRA for additional details.

QuickBooks Tip - Holiday Related Meals and Entertainment:

Any gifts given to clients that have a meals and entertainment component are only deductible at 50%. Consequently, while gifts to customers are generally categorized as marketing or promotions, if the gift is a bottle of wine or tickets to hockey game for example, they should be allocated to meals and entertainment.

Conversely, office parties which would normally be included in meals and entertainment, is better allocated to another category that is 100% deductible to ensure that this isn’t overlooked when preparing the tax return. An appropriate category for office holiday parties is office expenses or you can create a new category called office events.

Books and Resources

NEW: FastStart Your Corporation(Corporations)
The step by step guide to starting your small business corporation, including what you need to know about incorporation, setting up your accounting and tax considerations.

QuickStart your QuickBooks(Sole Proprietorships and Corporations)
A comprehensive guide that takes you through the many features of QBO and gives you step by step instructions on how to setup and work with QBO day to day. It is ideal for beginners who have never used QBO before and also for those who are currently using it, but have questions or need guidance.

Small Business Tax Facts(Sole Proprietorships)
For those of you want to have a better understanding of tax, how it applies to your unincorporated small businesses and how to do your own tax return (or at least understand what your accountant does). It also includes a comprehensive breakdown of deductible expenses, by category, with somewhat entertaining examples.

FastStart Your Business (Sole Proprietorships)
A step by step guide for anyone who is planning to start a Canadian business or become self employed (as a sole proprietor) and wants to know what they need to do or simply has questions.

Small Business and Your Dividends (Corporations)
Explains what incorporated small business owners need to know about small business dividends, differences between salary vs dividends and step by step instructions on how to file your own dividend declarations (T5s).

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New: Starting A Corporation Checklist
Start Your Business Checklist
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Business 2021 Tax Deadline Calendar
QBO Set Up Checklist.
Small Business Calculators
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Hope everyone has a bright and wonderful weekend!

Ronika