Here at Danielle’s SOS Financial we are committed to providing you with the largest tax refunds you deserve and finding every tax deduction you are eligible for.
To make sure you don’t miss something, and to help you get every deduction and credit you can, we’ve prepared this handy checklist.
–Bookkeeping vs. Accounting–
If you’re a small business owner, you might be wondering if you need to get a bookkeeper or an accountant – or both.
And now that you understand the need for bookkeeping, you’re might be wondering, “How does it differ from accounting?”
The words “bookkeeper” and “accountant” are often used interchangeably. However, there are some key differences that determine the main responsibilities of each role.
–Bookkeeping is a Subset of Accounting–
An accountant, professional bookkeeper, or an employee of the business can do your bookkeeping.
If you’ve just started a business, chances are you’ll be doing the bookkeeping yourself.
This is no bad thing. When launching a new business venture, it’s crucial that you have an intimate grasp of your financial situation. What better way than to do the bookkeeping yourself?
Essentially, bookkeepers take care of the day-to-day financial work.
They keep detailed and accurate financial accounts and use this financial clarity to help make informed business decisions.
–Accountants are Financial Experts–
Accountants are usually qualified, registered members of a statutory association. So they often have titles like CPA (Certified Public Accountant) or CA (Chartered Accountants).
That’s how they can charge the big bucks.
These experts will use the accounts provided by the bookkeeper. They focus on analyzing the transactions to provide financial advice.
They’ll also use the information in the accounts to file tax returns and other reports.
Whereas bookkeepers handle the day-to-day financial tasks, accountants often step in on a quarterly basis to provide advice and make adjustments.
If you find yourself in a situation where you have filed your personal tax return and then realize that you need to make a change, there are some steps you need to follow.
First, you need to wait until the notice of assessment on your original return is received before you file a T1 adjustment. Do not file a second tax return for the same tax year. This will ensure that CRA has processed the original return and can then process the adjustment without any confusion.
Do not file a second tax return for the same tax year
Once you have received your notice of assessment, file only a T1 adjustment for the changes you want to make. Do not file a second tax return. You are not required to submit receipts or slips if you file your T1 adjustment electronically, however, you may need to provide them if asked. If you choose to submit your T1 Adjustment by mail, you are required to send in the receipts or slips to support your adjustment.
You are able to ask for an adjustment to be made to a tax year ending in any of the 10 previous calendar years. For example in 2016, you can adjust tax returns dating back to 2006. Once you have sent in your T1 Adjustment, CRA has processing times up to 8 weeks before a Notice of Reassessment is issued. The reassessment will state any changes made or why changes were not allowed.
If you are a Canadian Controlled Private Company (CCPC), you can amend your corporate tax return within 3 years of the date of the original notice of assessment. If you are not a CCPC, you can amend a tax return within 4 years of the original notice of assessment date. An additional 3 year extension is possible for certain situations including;
Before filing an Amended T2, wait until the Company has received the Notice of Assessment on the original return filed. Then, proceed with filing an Amended T2. These can be filed electronically or by mail. If the amendment includes a carry back for a loss or a credit to a previous tax year, additional schedules are required to be provided to CRA which include;
Once CRA has processed the amendment, the Company will receive a Notice of Reassessment. CRA does not provide a time frame for how long a reassessment will take.
If you have questions please reach out to one of our representatives at 587-754-2910 or click hereto send us an email!
Should you incorporate your small business? (Sole proprietorship, partnership etc)
Jumping from Sole Proprietorship to Corporation in Canada? We’ll break it down step by step.
Earning side income or owning a small business can be a very rewarding experience, both emotionally and financially. The obvious perks of such a venture are unlimited earning potential and a whole lot more freedom and choice.
In Canada a business can operate as a sole proprietorship or a corporation. Often most small businesses operate initially as sole proprietorships and later incorporate for various reasons discussed below.
Editor’s Note: The same principles discussed in relation to sole proprietorships apply to limited partnerships.
Sole proprietorships typically have the following government reporting requirements:
Very Limited Liability Protection:
Under a sole proprietorship the owner is personally responsible for all debts and liabilities and legal costs of the business. These debts may include credit cards, business loans or liabilities arising out of lawsuits. If the small business operating as a sole proprietorship is unable to fulfill these debts a creditor is almost certain to seek restitution through the forced sale of personal assets (house, car, investments) of the owner in court.
Corporations may be subject, but not limited to the following reporting requirements:
Typically expenses written off by corporations can similarly be written off by sole proprietorships, however, a corporation allows for additional income splitting in certain situations which may lower overall taxation. For example, suppose a spouse is the shareholder of a corporation that manages the overall operations of the business. If the other spouse helps out the business with administration and other tasks a reasonable salary can be paid which can be written off by the business and taxed at a low personal rate.
Increased Liability Protection:
A corporation allows for an owner/shareholder to separate him or herself from the legal responsibilities of the business. If the corporation is unable to pay debts or liabilities the creditor or plaintiff may only seek assets owned by the corporation and not the shareholder. There are certain situations in which a shareholder may be personally liability, such as providing personal guarantees for corporate debts, remitting sales tax and payroll remittances, so talking with a knowledgeable lawyer is always a good idea.
Justification and advice on cost comparison vs value:
Often I see small business owners of both sole proprietorships and corporations attempting to skimp out on paying professional fees. Having run my own small accounting business myself, and having provided tax planning services in an accounting firm, I understand the value of these services is often difficult to quantify or justify, especially considering the cost of professional fees. However, I’ve also seen situations where personal and corporate bank accounts have been frozen by the CRA for non-compliance, or an unexpected tax bill cripples cash flow because these issues were neglected. There can be tax minimizing opportunities lost (such as tax deferral, income splitting and other deductions) by business owners when they fail to engage a competent accountant. Paying a competent professional can ensure a business handles these issues before they become massive problems.
The corporate small business tax rate in Ontario is 15% on the first $500,000 of income. Sweet sassy molassy, that’s way lower than the personal tax rates above. Why doesn’t everyone just incorporate? I know, right? Well, hold on there that rate is for income earned in the corporation and it must stay there until paid out to the owner via salary or dividends. This is where tax planning comes into play and can drastically affect your take home pay if you’re earning some decent money.
Here’s an example of a business earning $100,000 in income under the sole proprietorship VS corporation.
Now recall that for a corporation we have to pay a salary out to the owner in order for him or her to access the profits. If the owner wanted $70,000 in salary and wanted to leave $30,000 in the business for future investment it would look like this:
|Net Income||$100,000||$30,000 (reduced by $70k salary)|
|Business Taxes Payable||$26,600||$4,650|
|Employment Taxes Payable||$15,000|
|Total Taxes Payable||$26,600||$19,650|
By incorporating and paying a $70k salary the business owner would save close to $7k in taxes. If the business owner would live off a salary less than the net income of the corporation we can see considerable tax deferral and capital appreciation by leaving the funds in the corporation and investing. The Canadian corporate tax rate has decreased substantially over the last few decades to encourage business spending.
Final Decision: Incorporation: Is it right for you?
There are a lot of other considerations when thinking about incorporating a business. While the administrative and compliance responsibilities and costs are much greater under a corporate structure the benefits include liability mitigation of the owner, tax savings and estate planning. It probably doesn’t make sense for a small business with minimal operating risk and net income under $30k to incorporate as a low tax rate is already enjoyed. As a business grows so too do the tax liabilities and operational risk, which may indicate it’s time to prep those articles of incorporation. When a business reaches net income above $30k it may be a good time to discuss if it’s time for incorporation. Each business owner should consult with a lawyer and accountant to determine if the increased costs are offset by the benefits.
When a business is started, it can be structured as a proprietorship, partnership, or corporation.
A sole proprietorship is one person operating a business, without forming a corporation. The income of the business is then taxed in the hands of the owner (the proprietor), at personal income tax rates. The income is considered income from self-employment, and is included on the personal income tax return of the owner.
A partnership is also an unincorporated business. It is similar to a proprietorship, except two or more entities are partners in the business. For partners who are individuals, the income from the partnership is taxed at personal income tax rates, and a percentage of the income is included on the personal income tax return of each owner.
A corporation is a separate legal entity, which is formed by application to either the federal government, or one of the provincial/territorial governments. The corporation issues shares to the owners, or shareholders. The funding of the corporation can be done through the issue of shares, or by borrowing. Instead of investing a large amount in shares, shareholders can lend money to the corporation, and invest only a minimal amount in the shares. This way, when the corporation has available cash, the shareholder loans can be repaid without attracting personal income tax.
Being a separate legal entity, a corporation pays corporate income tax, which is calculated completely separately from the owners’ personal income tax. If the corporation pays wages to the shareholders, income tax and Canada Pension Plan contributions, and sometimes Employment Insurance premiums, must be deducted and remitted to Canada Revenue Agency.
Generally, the higher the net income of your small business, the more advantageous it is to incorporate instead of remaining as a proprietorship.
No matter what the type of business structure, spouses and children can be employed by the business, thus effectively splitting income. However, amounts expenses must be reasonable amounts based on services provided, and must actually be paid to the spouse and/or children.
Each type of business entity has its advantages and disadvantages. It is wise to seek professional advice to assist in your decision-making, and in the setting up of your business structure. It is also very important to get your accounting records set up and organized properly at the start of your business.
Greetings Friends and Colleagues,
The Community Relations team at the Edmonton Police Service is committed to staying connected with you and sharing EPS news in a timely fashion. We are very excited to share our new Strategic Plan for 2020-2022 with you, which lays out our new vision, mission, and goals and captures the new direction EPS is undertaking.
As our new goals outline, EPS wants to:
The Vision 2020 restructuring that you may have heard about realigns our current resources to streamline and achieve the new vision mission and goals.
We, along with the Strategic Social Development Division within EPS, will continue to connect with community partners over the coming months to ensure our measures of success resonate for the communities we seek to serve and support, and to ensure we are achieving our goals collectively.
If you have any questions about the new Strategic Plan, please don’t hesitate to contact us! We hope that you will accompany EPS on this journey of becoming a forward-thinking police service that strengthens public trust through addressing crime, harm and disorder.
Wishing you all good health and safety,
The EPS Community Relations Team
Good afternoon everyone,
I want to provide the following link to a great set of resources specifically provided for residents of Beverly by the Beverly Inter-agency (Including City of Edmonton, Hope Mission, Beverly Business Association, Edmonton Public Library and more)
Public link to the Google Doc (view only access):
Click below on the link to directly download the PDF!
We are very pleased, proud and excited to be part of such a resourceful and resilient community!