Tips for preparing and filing your Canadian small business taxes on 2021
Tax time is always challenging, add a business into the mix and you add one more layer and this year, there are all the complexities of CERB, CESB, CRB, CEWS AND CEBA. Wow! That can feel overwhelming so let us break things down into more manageable pieces and action steps so you can feel confident about your small business taxes prep this year.
One of the biggest gifts you can give your small business this tax season is to be well organized and prepared. When things seem too complicated or difficult to decipher, we can tend to procrastinate and even ignore the situation. We all know from experience this usually tends to make things worse. So, why not start getting organized? What will you need?
+ Previous tax return
+ Revenue, income, dividends
+ GST, Payroll
+ Speak to your Bookkeeper, Accountant or check out the CRA site for more details (Don’t have a Bookkeeper or Accountant, ask us about our reputable partners) You can even designate a professional as your Authorized Representative to act on your behalf and deal directly with CRA
+Start planning for next year’s tax returns now. Yes, get a checklist of what you should keep, explore ways to reduce your business taxes next year and put plans in place, look at tax shelters for your business and create an easy to manage system to stay organized all year. With a great system, tax filing time can be as easy as handing over a binder or file folders neatly organized, labelled, and ready for your tax professional. This will reduce stress and can set you up to keep more money in your business rather than at CRA.
Tax filing will be virtual for everyone this year due to COVID which actually could make for faster filing, speedier processing and getting any refunds back faster too. Prepare yourself for virtual filing. Ensure you have the technical tools or again, work with a professional who does. A word to the wise, file early this year. This will avoid late penalties and really get that monkey off your back so you can focus on growing your business.
Be Prepared for the Worst Case
Unfortunately, there is still some uncertainty around claw backs and other repercussions of the various small business grants and government stimuli during the pandemic. Businesses are often audited and taxed differently than individuals and there can be a balance owing to CRA. This means some recipients may owe tax when they file a return, depending on their personal circumstances, the type of COVID-19 emergency benefits received, other sources of income, deductions, and credits, according to the CRA.
It is prudent to be prepared and keep some cash aside to cover any balances. What if there just is not any cash available or not enough to cover your CRA bill?
Check to see if you qualify for any tax credits. Depending on your province and your circumstances you may qualify for a tax credit which can help to minimize what you owe CRA. Consult your tax professional to details.
If there are no credits or not enough and you still have a balance owing to CRA, explore the CRA for the interest relief program or payment arrangements. If this is still stretching you too thin, taking money away from your business or just too overwhelming then the best alternative is to speak with a Licensed Insolvency Trustee. The only way to have tax debt forgiven is through a Licensed Insolvency Trustee. Now, this does not necessarily mean you have to declare bankruptcy. A great alternative to bankruptcy is a consumer proposal.
The advantages of a consumer proposal for small business owners are:
+ Your assets do not need to vest (all be held by) the Trustee.
+ You can continue to be the director of your company or become one in the future.
+ There are exemptions of assets that cannot be taken away from you depending on the province you live in
+ It is a lesser hit to your credit report.
+ You can rebuild credit during the proposal.
+ It is a forced settlement at no interest with one monthly payment.
+ You can pay it off early if you choose or if when your business grows again.
+ It is one of two ways to rid yourself of the crushing burden of CRA debt.
Doing you tax return is inevitable but suffering through paying overwhelming tax debt is not. Know your rights and have the courage to seek the right help. Seeking help is one of the bravest things we can do, especially as a small business owner. You are not alone, nor do you need to face this alone. Just like you consult professionals to help with supply chain, marketing, and other aspects of your business, you want to surround yourself with financial experts to help you keep more money in your business. A good, qualified, experienced business Accountant is vital to ensure your business is CRA compliant, taking advantage of all business tax shelters, off sets, that you gather the right information and that you file your business taxes on time and thoroughly.
If you and/or your business are feeling overwhelmed by debt, a federally legislated Licensed Insolvency Trustee is the expert in the community you want to turn to. Licensed Insolvency Trustees (LITs) are federally legislated. They are bound by federal and provincial regulations, there is a complaint process, and they are the only ones that can offer legal debt forgiveness. Debt forgiveness is unique to Canada and select countries, not all countries have this legal exit strategy build in to rehabilitate Canadians, build faith in our credit-based system and help Canadians to rebuild. Just as the government turns to health experts during the pandemic, Canadians in debt can turn to the debt experts – LITs.
Tax time does not have to be scary or complicated. Taking some time to get organized and prepared and knowing which professionals to have on your team can take the stress off filing business taxes this year.
If you need help, ask us your questions, or book your consultation today. No matter how difficult or complicated your financial situation may seem, you can rest assured there are options available to get you out of the perpetual cycle of debt. Contact Bromwich+Smith today for your free consultation. Our Debt Relief Specialists are available by phone at 1.855.884.9243 or you can request a call back via our contact us page. There is no need to travel to a local office. Licensed Insolvency Trustee, Bromwich+Smith, is now offering video appointments, with all services available from the comfort of your home.
By Taz Rajan Community Engagement Partner at Bromwich+Smith
Taz has been in the finance industry for nearly 2 decades and has always been passionate about education and empowerment. Having declared bankruptcy herself, she intimately understands the shame, stigma surrounding matters of debt as well as the joy and relief that comes from restructuring. Taz actively works to normalize the conversation of debt through blogs, media interviews, webinars, lunch & learns and through building relationship.