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Business Alert: Is your Bookkeeping taking a Backseat? C2online
It happens all the time, especially with small business owners.



“Why hire a bookkeeper when I can do it on my own?”


The best of intentions….


We understand—bookkeeping is tedious. It often requires a lot of time and mental effort.
Time that is needed to put out fires or to grow your business, which is why it gets put on
the back burner.


But crucial business decisions should be based on how well the business is doing
financially…and you can’t know that without good bookkeeping records.


And without proper record keeping, your company’s financial statements can be put into
question.


These are some of the common ways business owners run into problems:


Delayed record keeping


This tops the list. Falling behind on bookkeeping has a snowball effect. Small expenses
that seem insignificant at the time aren’t recorded—and because they are small,
business owners disregard them. But over time, they can add up, having an impact on
the company’s financial situation.


Improperly allocated expenses


This can have serious implications for your tax return. Possible scenarios are:


Significant amounts are wrongly assigned as non-tax deductible expenses.
Advances to suppliers and other business entities are not converted to
expenses when the contracts are fulfilled. Your assets will look good, but your
expenses will be understated, potentially leading to business decisions based on
misinformation.
Incorrect classification of salaries to employees and payments to consultants
and/or contractors—which fall into different categories. When these aren’t
classified properly, expense claims and tax deductions can be lost.
Sales Tax. This is an often-neglected bookkeeping task. When a business has
sales, the usual reporting method is to acknowledge sales in the books, and cash
received or update the receivables. But Sales Tax? It has to be declared, but
many business owners forget or neglect to do this.


Advice? Hiring a good bookkeeper will save you money over the long-term and free you
to do what you do best—grow your business.


Every Dollar Matters - Increase Revenues After Tax Season Lisa Patrick

During the current recession, many businesses and individuals are turning to professional accountants in order to ensure the correct preparation of their tax returns to avoid costly penalties. This means that there are many opportunities for accountancy offices and franchises to grow - an opportunity for a new revenue stream to offset the lack of revenue after tax season.

But tax season for personal income tax returns is a 3 month a year revenue stream.  We all see kiosk’s in the mall from Liberty Tax and H&R Block but what about the other 9 months of the year? Your business client comes in once a year to file their T2 return but you don't see them for the other 11 months of the year?

Every dollar matters in your business and revenue streams in off peak season are vital to the success of your business.  Bookkeeping offers the opportunity for your business to offer another service for your clientele and generate another revenue stream for your business. But your not a bookkeeper, you're an accountant or a business owner!

A brand new software Bookkeeper’s Quote™ now provides you the opportunity to profile new clients or existing clients and match their businesses with bookkeeping tasks required.  The bookkeeping software provides you the communication tool necessary to discuss the tasks associated with bookkeeping and at the same time provides you the checklist of bookkeeping tasks you will need to complete to provide a bookkeeping service.

Bookkeeper’s Quote™ also will create accurate bookkeeping quotes that properly reflect a bookkeepers' time and work on clients' accounts, based on your rates and task/time settings or default proven standard times.

Bookkeeper’s Quote™ is designed to assist the user in Communicating 2 the client about the costs and any adjustments in billings after the quote.

Bookkeeper’s Quote™ includes everything you will need to ensure you provide accurate reliable service to a client.  Whether they are new to your office,  client information is recorded, compliance methods assured, contacts with the government accounted for, posting and invoicing recorded, payroll included and tax regulatory issues are highlighted and more.

So if you are looking to add a revenue stream to your existing business or a new business that compliments what you are currently doing think about bookkeeping and make every dollar count.

 


Scholarships Payable to Family through Your Business Lisa Patrick

We have recently determined that a business may pay a scholarship to a staff member or their family members.  This would be a taxable benefit in some situations to the family member.

If the family member meets certain criteria, he or she may be able to exclude the amount from income on his or her income tax and benefit return. Any questions about the T4A slip issued to the family member, you can refer them to Scholarships, fellowships, bursaries, study grants, and artists’ project grants http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/130/schlrshp-eng.html , or to their General Income Tax and Benefit Guide.

For more information please follow this link to Tuition fees, scholarships, and bursaries
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/dctn/ttn-eng.html


Salary or Dividends? Lisa Patrick

Wages vs. Dividends

If you own an incorporated business, there are two primary ways to pay yourself:

Salary and/or Dividends.

If you pay yourself a salary, the amount is a deductible expense to your company and is taxable in your hands. You will be required to deduct income tax and CPP premiums from your salary.

Some Advantages:

  1. Salary is treated as earned income for RRSP purposes.
  2. Salary is ‘provable income’ for financing purposes. If you are planning on applying for a line of credit or a mortgage, then paying yourself a salary will help you to qualify.
  3. Salary is subject to Canada Pension Plan (CPP) premiums. By paying into the Canada Pension Plan your entitlement to CPP will increase.

If you pay yourself a dividend, you must first understand what a dividend is.

Dividend is the return on investment from the business you invested in. They are payments made to company shareholders from the profits of the company.

They provide you the opportunity to have the income taxed in your corporation and then pay the after-tax earnings to yourself, as dividends, which is not deductible for the corporation.

Some Advantages:

  1. Dividends are taxed at a lower rate than salary. 
  2. Dividends are not subject to CPP premiums, which can add up to big savings.
  3. Dividends are administratively simple. You do not have the burden that you do with payroll.  To pay yourself a dividend, you simply write a cheque to yourself from your corporation.

4.    Can be paid to individuals who are not employees of the company (They must be shareholders).

5.    No payroll process.

NOTE: in order to pay yourself dividends your articles of corporation must allow for dividends to be paid.

When deciding it is not a cookie cut answer and every business must make a decision based on the information above and the further additional following information that is relevant to their business and personal finances:

1. # of employees - are you an employee of your company?

2. other personal income outsides of the business

3. profit vs loss

4. best income tax rate

5. whether RRSP contributions are a consideration

Before making any decisions please contact your tax accountant to discuss further.  In the event you do not have a tax accountant please contact us for a free ½ hour consult.


Cash is King, Build your pile of Cash! Lisa Patrick

“Cash is King”, how many times as an Entrepreneur have you heard that?  It is true, when you run out of cash - you are out of business.

You can make sure that your business survives by strategizing to ensure you are maximizing on all the corporate income tax deductions available and ensuring that you are aggressively monitoring and allocating your cash flow appropriately to grow that pile.

Many sole proprietors and partnerships use the strategy to incorporate their businesses because of the tax advantages that an incorporation will provide when their business has grown large enough for the incorporation to be worthwhile. The best known of these tax advantages is the Small Business Tax Deduction.  Income of a Canadian corporation is taxed at a special “reduced” rate.  The small business Corporate net tax rate is 11%.  Other types of corporations that don’t qualify for the small business rate are taxed at 19.5%.

When is it worthwhile to incorporate? When you have a significant income that offsets the costs or expenses of the corporation, BUT you need to leave enough cash/revenue of your earnings to benefit from the corporate tax deferral.

Secondly, in order for businesses to strategize and ensure that they have all their tax advantages available to them - below are some opportunities to maximize on deductions for consideration:

Home based businesses can utilize the business use of home deduction and deduct a portion of many home related expenses, your property and your mortgage interest by comparing the time you spend in your home as an office and the amount of space that you utilize in that time.

Collect ALL your receipts that you spend money on – this includes the parking meter, the bag of coffee, the 10 pencils you bought, all those little things will add up at the end of the year.  Account for ALL the money you spend on purchases that are business related.   Ensure that you have the appropriate receipts to record and file to maximize on your business income tax deductions.

Your vehicle is viable to your business. Without vehicles you and your employees would have a hard time getting to work and your business might not be able to function. By planning ahead and preparing a strategy for your vehicles you will ensure that you are maximizing on the deduction and ensuring you increase your pile of cash.  Remember to record your receipts and your kilometers so your bookkeeper & your accountant have all the information they require.

A convention provides you the opportunity to work on your business in an environment where you are not caught in the day-to-day life of managing your business.  Critical aspects of your business are overlooked and you could be missing out on tax-deductible savings you could be enjoying.  In fact, if you don't take the time to analyze your business you could be missing out on thousands of dollars in business tax deductions and the opportunity to increase that pile of cash. 

Revenue Canada states that you can attend 2 conventions a year.  What if I don’t have the opportunity to attend an organized convention?  Now you can.   Your intent must be business and you need to create an itinerary based on the needs of your business. Follow your itinerary; use pre-designed convention agendas for the different departments and needs of your business.  Analyze, strategize and problem solve those areas of your business and you will ensure that you are not missing out on thousands of dollars in business tax deductions while you create a new perspective and strategy for your business.

Bookkeeping is often overlooked as an opportunity to maximize on business tax deductions. Why? Bookkeeping management of finances is more than merely harmonizing the bank accounting.  The objective of any small business owner is to achieve success in both the marketplace as well at a financial level. However as easy as it may sound, it isn’t a task each one of you may be competent to accomplish.  Your bookkeeper must ask the right questions from you, be able to communicate to you and your tax accountant, and understand their job description to ensure they are providing tax compliant bookkeeping.

For more information and tools to analyze your business, ensure proper bookkeeping and maximize on your business deductions to ensure your pile of cash keeps growing and you are the King, contact us today.


Biz Begins with Books Lisa Patrick

T2154 - Forgiven Debt Lisa Patrick
Yikes, your company has been forgiven a debt…  That could mean you have income and gst to report unless you designate the amount was initially an equipment cost and reduce the asset value.

There are extremely complex rules dealing with situations where taxpayers who have commercial obligations (debt) and that debt is settled for less than the principal amount. If the debt is personal or non-commercial in nature, nothing happens. In these cases, the debt is defined to include debt where the interest is not deductible for income tax purposes. Commercial debt is debt where interest is deductible for income tax. To be deductible, it must have been incurred to earn income from a business or property. However, even in cases where the debt was non-interest bearing, the debt forgiveness rules apply where interest, if paid or payable, would have been tax deductible. Where commercial debt is forgiven, the forgiven amount is subject to certain special tax treatment.

  T2154- Application of Designated Forgiven Debt Under Section 80 <http://www.cra-arc.gc.ca/E/pbg/tf/t2154/README.html>
 
Do not do this accounting entry or tax entry without talking to a Tax Accountant or your local Tax Centre.

A debt could mean an income and income means possible taxes to pay!

IF you need help contact us. Darlene Lafond R.P.A.


Have you considered these tax strategies?? Lisa Patrick

When you are looking for a strategy regarding your personal and corporate income taxes these are some things you may want to consider:

1.      Have your company buy you your RRSPs?   Money taken and deducted on your personal income would mean no tax consequence to you personally.

2.      Have your company pay your children’s tuition for college or university or trade school?   Tax on the Money can be avoided to the children in the event they do not attend the educational program for that year.

3.      Have your company pay you rent to use your personal items and less wages?   This will avoid CPP premium cost.

4.      Have you considered talking to your tax accountant before your company year end?

It is never too late to explore a possibility but take advantage of them this year!

 Call your accountant or contact us to learn more about income tax deductions and corporate tax strategies.

Darlene Lafond R.P.A.


Is your home your office? Lisa Patrick

Whether you’re a contractor occasionally working at home or an entrepreneur you need a room of your own to work in.  Don’t give in to the temptation to work on the sofa in front of the television.  Instead, have your own working space. This should be a permanent desk in a spare room with all the equipment that you need.

Having a defined separation when possible in your home as your work space will ensure that you won’t drift in out of work and ensure your entire focus is on your work. Make this space comfortable to work in, a space uncluttered, organized and make your home office your own – personalize your space.

When you work from home you will need to be sure that you are accurately accounting for all your office in home space so that you can utilize that tax advantages to working from home.

Utilize C2online's Office in Home Calculator to assist you to ensure that you take full advantage of your home, garage and yard space so you get the biggest tax savings possible.

Lisa Patrick


Do you Ignore Government Mail? Lisa Patrick
If you get any mail from the government, please bring it to your tax professional right away.  Some mail is date sensitive.  It could cost you money if the mail is not attended in 90 days in most cases.

Even if the government states you do not qualify for something, assume the government made a mistake and see your tax professional.  If you have no professional, please sent it to me by email and I will tell you - no charge if you need to see someone!
 
I just rushed a notice of objection through today that was one day from expiring and I believe the government has made a mistake that will get my client back $1625.00!

Darlene Lafond R.P.A., C.P.C.

 
Do not ignore your government mail!

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