Early preparation for the end of the fiscal year for your business can reduce stress at tax time. Whether you have an internal accounting department that handles your paperwork, or you hire someone out of the office to file your taxes for you, there are a few ways to prepare for getting those returns filed accurately, timely and to help you achieve the biggest refund possible. For most individuals and businesses, the tax deadline is April 30 in Canada. If you are self-employed you have until June 15th to file without penalty, but any taxes owed are due by April 30. Consider the following tips on how to prepare to file.
Organize and Gather Your Financial Records
Update all books to reflect any end of the year transactions to prepare your tax records for your accountant. For a double-entry accounting system, make sure books are balanced so that the sum of all credits is equal to the sum of all debits. If you use a program like QuickBooks, this is completed automatically. Obtain your final bank account statements for the year and make sure your books match the bank records.
Cut down on accounting fees by gathering common business records. These documents include:
- Income statements
- Balance sheets
- Cash flow statements
- Payroll information
- A copy of the previous years’ tax return
Locate All Receipts
Maintain copies of receipts throughout the year as proof of any deductions. The Canada Revenue Agency (CRA) recommends you keep tax records for a minimum of six years in case of a business audit. To eliminate stacks of papers tucked all over the office and in filing cabinets, consider going paperless and uploading all receipts to cloud storage. Apps like Bench, Dropbox, Google Drive and Evernote support scanning and storing. Organize all receipts by type. Also, separate personal spending from business spending.
Understanding Tax Forms
When filing taxes on your own, find out in advance what tax forms are required. For a sole proprietorship or partnership, the CRA requires a T1 personal income tax form. For a partnership, the T1 income tax return package is needed, which includes form T2125, which is the statement of business or professional activities. The CRA has a complete list of forms and publications online for both personal and business use.
Start early to ensure important documents and data are in order to help produce a favorable outcome during the tax season.