5 Reasons to Change Your GST/HST/QST Reporting Period and How to Do It
When starting a business the selection of the GST/HST or QST reporting period i.e. how often to file your sales tax returns is often based on new business considerations. Many new business owners are quite enthusiastic and/or orderly and therefore would prefer to file their reports and pay the balance owing on a more regular basis. Conversely owners might be concentrating on the other aspects of running their business and do not want to be bothered with the administrative hassle of regular monthly or quarterly reporting. In this case, you might select the annual reporting option to make the year end reporting requirements as simple as possible. As time passes and your business evolves, you might realize that the option that you initially selected may no longer be the most optimal.
Why a Separate Bank Account is Essential for Your Small Business
If you are self employed or a small business owner taking care of your own accounting and business finances, you have probably discovered that this can be time consuming and occasionally frustrating. It can sometimes be difficult to know if you are doing things correctly. Consequently, you procrastinate, which makes things worse at year end or tax time. To combat the problem it is important to have tools in place to facilitate the process and make it less painful, which could include accounting software and/or a bookkeeper as well as a good organization system for your documents, whether you have a paperless office or a manual filing system. Another very simple measure that you can take is to have a separate bank and credit card account for your business.
Tax Deductions vs Tax Credits and 5 Tax Deductions to Help Reduce Your Tax Bill
Most taxpayers use the terms tax deduction and tax credit interchangeably. Since they are not accountants, this is perfectly fine unless you are particular about precision and strive for a greater understanding of tax. And while there a numerous technicalities and jargon in tax that are better left to tax professionals, this particular distinction is fairly straightforward , can useful to understand and might even save you some tax.
So, what is the difference? A tax deduction is a reduction of your net income on which your taxes payable are based, while a tax credit is a direct reduction of your taxes payable. These might sound very similar, but their impact on how much tax you pay is different. Since there are different tax brackets, a tax deduction results in a reduction of your taxes payable effectively at the highest tax bracket to which your income applies, while a tax credit (for simplicity we are only talking about the federal portion and not provincial) will only reduce your taxes by 15%, which corresponds to the lowest tax bracket. While this can get significantly more complicated, suffice it to say, if your income exceeds approximately $50k, tax deductions have a higher value i.e. they reduce your taxes by a greater amount than a tax credit since part of the $50k will be taxed based on a higher tax bracket.
9 Tips for Building a Sales Forecast
Having a dynamic, regularly updated sales forecast can be essential to the success of a small business. By forecasting your sales revenue you are helping to control for its unpredictability, an inherent risk in any business venture, and prepare for the decisions that are essential to your business profitability. Whether your sales are increasing, decreasing or static, it is always better when decisions are made proactively rather than reactively.
Building your small business sales forecast can be as simple as you want it to be and does not require an accounting degree , particularly when your business is in the early and/or startup stages. Below are some tips to help you create your sales forecast:
A Guide To Payroll Deductions for Employees and Employers
So, if you have ever been an employee in Canada, you have received a paycheque. The salary or hourly rate is decided upon by you and your employer. Your employer is then responsible for calculating the deductions required by Revenue Canada (and Revenue Quebec for QC based employees) and remitting them to the revenue agencies. They must also complete the T4s (and RL1s in Quebec) for the full year and give them to the employees by February 28th of the year following the year of employment (regardless of termination date during the year) and ensure that they give them to you so that you can complete your tax returns.
5 Reasons Your Small Business Needs an Accounting System
So, what exactly is an accounting system? At its core, an accounting system is a method of organizing your financial data. There are various types of accounting systems out there, ranging from complex enterprise solutions to simple small business accounting software like QuickBooks. You can even use a spreadsheet if your business is straightforward with minimal transactions. The key is to have some system in place to manage your finances effectively.
Now, let’s explore the five reasons why every small business, including yours, needs an accounting system.
20 Essential Tax Facts for Small Business/Self Employed Owners
Probably the most popular question posed to accountants and tax preparers (especially around this time of year) is what types of expenses are deductible. The short answer is that an expense is considered to be deductible if it has been incurred with the ultimate purpose of earning income. For example if you purchase a domain name with the intent of setting up a website to sell your goods or services, this would be a deductible expense. However, if the purpose of your website is simply a place to show pictures of your cat, this would not be considered a business and therefore not a deductible expense. Of course if your cat picture website starts to become popular and you decide that you want to actively build this business by advertising on the site or partnering up with cat product resellers, your non commercial hobby could then be considered a business. Since you now have the intent to build a business the income earned would have to be reported and expenses incurred to earn this income would be deductible.
Deferred Revenue and its Impact on your Small Business
Most small business owners are familiar with the concept of revenues, which is essentially the total sales of their product or service, to customers and clients, prior to deducting any costs. Revenues are a crucial component of business’ profit and loss statement and it is essential that they are accurate so that the business owners may effectively analyze the profitability of their businesses. Additionally there are third parties for which the accuracy of the revenues, and corresponding financial statements, is essential for effective decision making. Third parties include tax authorities, banks, partners and key employees (on which remuneration/bonuses might be based).
What Types of Car Expenses Can Business Owners Deduct
Access to a car can be crucial to running a small business effectively. Costs of ownership, however, can be high relative to your revenues, especially in the early stages when your business is not hugely profitable. Luckily, Revenue Canada (CRA) and Revenue Quebec (RQ) allow both unincorporated/self employed individuals and owners/employees of corporations, who use their cars to generate income, to deduct the relevant expenses. Both CRA and RQ provide detailed guidance and have specific rules relating to the write off of car expenses. I discuss some of the main provisions that impact small business owners in this article and provide guidance on the differences between unincorporated (self employed/small business) owners and corporations.
How to File Your GST/HST Return Using CRA My Business Account
As of January 1, 2024 Revenue Canada will require all business (except for a handful of exceptions such as some financial institutions and charities) to file their returns electronically. This means that you can no longer use the paper form. The good news is that it is quite easy to file the return online and, in most cases, probably saves you time since you don’t have to put it in an envelope, affix a stamp and take a walk to a mailbox.
In this post, I will be reviewing how to do it via CRA My Business Account. Please note that this tutorial is for simple GST/HST returns. If you have more complex transactions, that I don’t discuss here and you are not sure, I recommend speaking to an accountant.
How to File T4s using Quickbooks Desktop
For all Canadian businesses that have employees on their payroll, the deadline to file your T4s is February 28th, The good news is that it has become much easier to prepare and submit the T4s particularly if you are submitting them electronically.. The Canada Revenue Agency (CRA) is encouraging businesses to file the T4s electronically and it should be noted that e-filing is mandatory for employers with more than 50 employees.
What is the Difference Between Zero Rated, Out of Scope and Exempt and how do you choose in QBO?
In QuickBooks Online (QBO), the terms "Zero Rated," "Out of Scope," and "Exempt" refer to different classifications of transactions for GST/HST and QST (in Quebec). Each one of these transactions results in $0 tax being added to the transaction, and if you use them interchangeably it is probably not a huge problem. That being said, there are a couple of reasons you might want to ensure that you get this right:
ensure accuracy in their books
avoid the small possibility that an a government (Revenue Canada) auditor might nitpick at it or
make your sales reports more accurate
The differences between the three classifications, which despite their somewhat technical names, are actually not that complicated.
How to Enter Opening Balances in QBO Using a Journal Entry
There comes a time for many small businesses or self employed workers when they decide that their current accounting system is no longer working for them. This can be stressful as learning any new software is often tedious and more importantly you have to ensure proper continuity and a smooth transition.
Small businesses might decide to transition to a new accounting software for a variety of reasons:
You are currently using spreadsheets which have become difficult to manage
Your spreadsheets do not provide the data that you require to properly analyze your business
Your current accounting system is too technical and/or not user friendly
Your current accounting system does not have the features that you require
You want to be able to access your data online rather than through your desktop
See our detailed review on whether QBO is the right online accounting software for your small business
10 Tips for Setting up Your QBO File for the first time
The idea of using an accounting software can be a bit intimidating for some new business owners. Others are put off by the cost when a simple spreadsheet is both free and easy. In some cases a spreadsheet makes sense when you have a simple business with very few transactions per year. However, if your business requires you to invoice your clients and customers , you want to be able to analyze the performance of the business and your time is at a premium, the monthly cost of an accounting software can be well worth it.
Quickbooks Online (QBO) is the most popular software used by small businesses. And while QBO has its pros and cons that should be evaluated before signing up, once you have decided to go ahead with it there are certain best practices that should be followed when setting up your file.
Is QuickBooks Online the Right Accounting Software for Your Small Business?
The search for accounting software can be a confusing and overwhelming process. A Google search for “small business accounting software” yields over 250 million results. Trying to get recommendations from other business owners often results in passionate discussions about why a particular program is great while another one is inadequate and lacks functionality. Your accountant might point you in the right direction, but will sometimes recommend a program that they are comfortable with using, but might be too technical and not necessarily be the best solution for your business. With so many choices out there, it can be difficult to know what to do.