Early preparation for the end of the fiscal year for your business can reduce stress when filing business taxes. Whether you have an internal accounting department that handles your paperwork, or you hire someone out of the office, there are a few ways you can help ensure your returns are filed accurately.
When are business taxes due in Canada?
Many businesses maintain April 30 as their filing deadline. But regardless of when your business filing deadline is, consider the following tips on how to keep things organized.
Organize and gather financial records
Update all books to reflect any end-of-the-year transactions and 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 by Intuit, this is completed automatically. Obtain your final bank account statements for the year and make sure your books match the bank records.
When preparing for filing business taxes, cut down on accounting fees by gathering common business records yourself. 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. But how long do you keep tax records in Canada? 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 your own business taxes, 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. If your business is a corporation, your organization will be filing a T2. The CRA has a complete list of forms and publications online for business use. Your organization may also be eligible for benefits or credits due to the impact of COVID-19. Before filing, make sure that whoever is putting your taxes together has considered your eligibility and acted accordingly.
Most of all, start your business tax preparation early to ensure important documents and data are in order to help produce a favourable outcome during the tax season.