What Types of Advertising/Marketing Expenses Can Small Businesses Deduct?
In the past advertising for small business owners mostly involved ads for print, television or radio (a catchy jingle was always a good way to go), cold calling (rarely a pleasant experience), sending out flyers or courting potential customers at a conference. Unfortunately, these types of advertising were problematic in that it is difficult to gage the direct impact of their effectiveness. Additionally, they were often fairly costly, which can especially difficult for small business owners to afford.
Over the past few years the avenues for advertising have grown exponentially. Many types of advertising don’t even cost anything, except time. You can buy ads on numerous social media outlets that appeal to your target market or if you want to go the free route, you can set up a social media account, post regularly and build an audience. Alternatively, you can set up a website which you can then optimize so that google and other search engines display it when someone is looking for your product or service. Email newsletters are also another effective and direct way of reaching potential buyers. One of the great benefits of these types of advertising is that you are better able to monitor the effectiveness of your chosen strategy.
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:
What to Do After You Have Incorporated
Deciding whether to incorporate can be challenging for many small business owners. There is a lot of conflicting information and it can be hard to determine, in the absence of experience, what facts are relevant to your situation. The internet can only answer so many questions. It can be helpful to speak to an expert on starting your business, but ultimately the decision is yours.
Once you have decided to establish a new corporation, there are certain best practices that you should implement to ensure that your corporation runs smoothly right from the beginning. By being proactive, you can turn your mind to your actual business and avoid unpleasant surprises (such as incomprehensible letters from the government)
What is Capital Cost Allowance and How Does it Impact Your Business
Frequently a client of mine will purchase a high ticket item such as a computer or a piece of furniture and will simply show it as an expense on their profit and loss. As far as they are concerned, if you spend money on acquiring something you should be able to write it off against your income. This makes logical sense from a certain point of view. Unfortunately, accountants and revenue agencies do not see it this way. From their perspective, an item that is purchased for a business, whose value extends beyond one year, is actually an asset that should be depreciated over the useful life of the asset. In other words, the expense that you can claim for the asset is only the portion of the asset that is used in the year that you claim it. While there are different accounting methods to reflect depreciation, Revenue Canada requires that you apply a percentage depending on the “class” in the asset is classified and is referred to as capital cost allowance or CCA.
What Types of Car Expenses Can Business Owners Deduct
Access to a car can be crucial to running a small business effectively. Costs of ownership, however, can be high relative to your revenues, especially in the early stages when your business is not hugely profitable. Luckily, Revenue Canada (CRA) and Revenue Quebec (RQ) allow both unincorporated/self employed individuals and owners/employees of corporations, who use their cars to generate income, to deduct the relevant expenses. Both CRA and RQ provide detailed guidance and have specific rules relating to the write off of car expenses. I discuss some of the main provisions that impact small business owners in this article and provide guidance on the differences between unincorporated (self employed/small business) owners and corporations.
4 Accounting Transactions that Use Journal Entries and How to Enter them in QBO
Accounting software has come a long way in the past few years. Although a good bookkeeper can be invaluable, It has become fairly easy for business owners and their support staff to take on the responsibility of entering day to day transactions while they employ accountants for the more complex aspects of their accounting and tax. While entering the majority of transactions in software, such as Quickbooks Online is fairly straightforward, there are transactions that require somewhat special treatment discussed below:
How to Change Your Personal Tax Return After It Has Been Filed
Revenue Canada recommends that you should wait to receive your notice of assessment (NOA) before filing an amended return. Once you receive your NOA, you should review it to verify if the error or omission has been reflected on the assessment. If not, then you would proceed with submitting the amendment. Luckily, you are not required to redo your entire return; rather you just need to submit details regarding the specific changes. There are several ways in which you can file an amended return.
What is a notice of assessment and How to Handle a request for information
After you file your income tax return Revenue Canada (CRA) and Revenue Quebec (RQ) will send you an acknowledgement (somewhat like a report card) that the return has been received and a detailed breakdown of the tax return that was filed including any discrepancies. It also provides some information pertaining to future years such as limits and carryforwards. The NOA is also referred to as an “avis de cotisation” if your preferred language is French or when you receive one from RQ. Some of the information that can be found on a notice of assessment includes:
How to Use Online Banking to File and Pay Your Business Sales Tax, Payroll DAS and Corporate Tax
The major Canadian banks including RBC,CIBC, TD, BMO and Scotiabank as well as some regional banks such Caisse Desjardins Access D’Affaires conveniently have business tax filings service which replicate the forms that have to be submitted to the government for:
sales tax (GST/HST and QST),
Payroll tax (deductions at source payable to Revenue Canada and Revenue Quebec) and
corporate taxes payable to Revenue Canada (CRA) and Revenue Quebec (RQ).
Business tax instalment payments (including GST-QST instalments)
This means that instead of entering the data on the forms that are available via my business account at CRA and RQ and then going to your bank to make payment, either online or via mail, it can all be done at one time through one form that serves as both tax filing and payment.
Should you use accounting software or a spreadsheet to track your small business finances?
Over the years my clients have come to me with their financial data in various formats. I have received shoeboxes of receipts which need to be deciphered and compiled. Some clients have given me their spreadsheets in excel, google or occasionally summaries in a word document. Others decided it made sense to use accounting software right at the outset of their businesses.
In many cases, using a spreadsheet is perfectly fine and sufficient for small business or self employed individuals where you simply need a way to determine your income and expenses. There are situations, especially when you are planning to do your own small business accounting, where it can be significantly beneficial to upgrade your record keeping from a spreadsheet to accounting software. I have enumerated some of the factors to consider when determining if your spreadsheet is enough for your accounting needs or whether it is time to upgrade.
Are Gifts to customers and business associates deductible expenses?
Giving gifts to clients or customers can be a great way to build goodwill, foster customer loyalty and differentiate yourself from your competition. Gifts can be anything from a simple bouquet of flowers to something a bit more personalized based on your knowledge of the customer (it can be useful to listen carefully or probe gently to find out what your customers might want as a thoughtful gift can be tremendously impactful). A gift can be given around the holidays, on birthdays, after closing a sale or any other time as a simple thank you. Of course, if you are buying gifts on behalf of your business, it is important to understand if they qualify as tax deductible expenses and it what circumstances.
How to Prepare the T2125 if you are a Small or Self Employed Business Owner
While being self employed comes with numerous benefits, there are also many challenges. One of the major ones is ensuring that you are aware of, and fulfill, your tax obligations on a timely basis. In the beginning these tax obligations can seem mystifying and somewhat overwhelming, but once you understand what needs to be done and you set up processes and reminders, it tends to become much more manageable. This in turn reduces stress as tax deadlines approach and can result in significant potential tax savings as you keep track of all your tax deductions and avoid interest and penalties.
How to Reflect Investment Income and Capital Gains/Losses on your Personal Tax Return
Residents of Canada are required to reflect all sources of worldwide income on their personal tax returns. For most individuals, who have investments with Canadian based banks and brokerages, this is fairly straightforward as you will receive the relevant tax slips, usually by March 31st of the year following the end of the calendar year i.e. for the 2023 tax year, you should receive all investment related tax forms and slips by March 31st, 2024. It is important, if you have investment income in non registered investments (i.e. not TFSA, RRSPs or FHSAs), to ensure that you have received all tax documents and report them. Failure to report income can result in penalties by Revenue Canada and Revenue Quebec, which is never great, particularly when it can be easily avoided. It should be noted that since most tax documentation is submitted by the issuer to Revenue Canada (CRA) and Revenue Quebec (RQ) electronically, they usually have a record of the various types of investment income for each taxpayer and can easily identify any missing information.
Make Your Taxes Easier with this Detailed Checklist
The deadline to file tax returns is quickly approaching, resulting in various degrees anxiety for some taxpayers and accountants. The good news is that the stress can be managed fairly easily with some simple organization techniques. The most effective starting point is to evaluate your tax situation and prepare a checklist of the documentation that you will need with respect to your specific tax situation. A checklist can help to ensure that important items are not overlooked in the rush to put everything together (and, of course, its always satisfying to cross something off the list).