Archive for category: Business Tips

Many accounting firms report a familiar trend every tax season. What is the trend, you ask? Clients announcing they have several years of returns to file or because they think, they owe money have not done their return. Either way this avoidance does more harm than good.

The CRA view overdue items in two distinct ways – a) compliance and b) collections. The first option requires you to file your return on time. The second results in two different charges – late filing penalties and interest. You could be liable for both if you do not file.

The strategy of avoiding filing your taxes could actually make the charges increase rather than minimize them. Filing on time will automatically save you the 5% (minimum) late filing penalty plus the 1% of your balance owing, which are charged each month (up to 12 months). These penalties actually double if it is your second offence. So avoiding filing is certainly not the answer, in fact it makes what you owe increase dramatically. For amounts owing from previous years, you will be charged compound daily interest and these payments will be applied to the previous years first.

Therefore, if you file, you will only pay what you owe at the regular interest rate, which at this time is 5%, rather than the added charges as detailed before. Don’t avoid filing and save yourself from extra payments.

Do you need a bookkeeper?  Well, we have an interesting answer.

I had an interesting conversation with a client this week and I wanted to share his perspective.

He is a small consultant, with no employees.

As we discussed his books we talked about his financial health and he asked me, “Do I really need a bookkeeper?”

It took me by surprise and when I asked him to clarify he explained, “Well I talked with some friends and they don’t spend nearly as much money on bookkeeping.”

It’s one of the first questions every small business owner asks themselves.  Do I really need a bookkeeper? It was really interesting to explain to him why he needs bookkeeping when I realized that he doesn’t really understand what all we’re giving him as a bookkeeping service and all he sees is the expense.

I think that I think this it’s actually quite important, especially to first time business owners. So, where’s the value?

 

Number 1:

When you have a good bookkeeper in place, the books are done properly and they’re done correctly.  This means when your tax return is done, you likely will end up paying less taxes.  So when you hear your friend saying they don’t pay that much money in bookkeeping, I would challenge them and ask how much their friend saved on their taxes last year.  Unless they had proper bookkeeping done, they may not have an answer.

 

Number 2:

Bookkeeping is about more than entering your receipts in the right columns. It’s about making sure you’re claiming all the right things, and all the costs are accounted for. If you only bring in eight cellphone bills, your bookkeeper should be asking where the other four are. We see an awful lot of clients forgetting to claim their insurance as an expense because they’ve set up automatic withdrawals, so without a hardcopy receipt it’s easy to miss. These are really common, and your bookkeeper should be asking you for all of those receipts, to make certain nothing is missed.

 

Number 3:

Your bookkeeper will know exactly what’s going on with your books and what you can and cannot write off. Just because you kept your receipt, doesn’t mean you’re entitled to a tax break. Bookkeepers know the ins and outs, and what to claim to get you the most bang for your buck.

 

And probably most importantly, we help other people in your industry. We often compare your books to the status quo, to see what’s going on and where any extras can be found.

There has been some talk recently about CRA having a 3 year strategy about focusing on the “underground economy”.  I have read the material that CRA has sent out.  If you are wanting details, I have put the link at the end of this blog.  As I have a few clients that I think may be at risk, I thought I would give my humble opinion on how to minimize your risk.

We consider the UE to include both unreported and under-reported sales or income, which may involve:

• failure to file or register;
• failure to report a business activity;
• failure to report part of a business activity or income; or
• failure to report employment income.

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Hiring a bookkeeper can be tough and confusing!

Without knowing how to do books yourself, you may not know if you are hiring the right person for the job.

First of all, you should understand that bookkeeping is an unregulated industry. Therefore, anyone can call themselves a bookkeeper, and there is no specific skill set they have to bring to the table in order to call themselves a bookkeeper.  To protect yourself, here are 5 simple questions to ask to see if you are hiring the right bookkeeper.

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Small business owners often think of their cash and their corporation’s cash as the same. But you are taxed differently than your corporation.

You are two different legal entities.  The cash the corporation generates and the cash you take out are often two different accounts.  As a business owner, you often have choices about how you take your money out of the company.

During this time of year, we see a lot of business owners come to us to get both their corporate books done, as well as their personal taxes done.

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