For business owners, implementing the below mentioned tax strategies before year end would save tax dollars by claiming higher tax deductions against your business income. There is still time left to take advantage of these tax strategies before year...
For business owners, implementing the below mentioned tax strategies before year end would save tax dollars by claiming higher tax deductions against your business income. There is still time left to take advantage of these tax strategies before year end.
Business Tax Tips to be implemented before the end of the year:
Maximize your CCA Claim – Purchase business assets before the year end – Do not wait until the next year to purchase business assets for your business. If you purchase the assets in the next few days until Dec 31st , then your corporation can claim 6 months of tax depreciation also known as CCA ( Capital Cost Allowance) on assets purchased in the current year.Let us take an example of the situation:
Your Business purchases Computer Equipment and systems software to be used in the business on Dec 30th for $15,000. The CCA rate for computer equipment is 55% / year. Even if your company owned the asset for 2 days in the current year, it could still claim 6 months of tax depreciation resulting in a deduction of
$15,000 x ½ half year rule x 55% = $4,125.
$4,125 is a dollar to dollar tax deduction against your business income.
Delay disposing off depreciable assets – If you are planning to dispose off depreciable assets, such as manufacturing equipment or computer equipment, do not dispose of them until the New Year. Otherwise, you will be reducing your Capital Cost Allowance Claim for this tax year. Make Business Purchases before the year end– If you have to make business purchases such as office supplies, maintenance & repairs, advertising expenses etc., then make sure to do them now to claim a tax deduction for the current year. Self – Employment Mileage Reimbursement – As a business owner, you are self-employed. CRA allows you to claim mileage driven for business purposes. For 2020, you can get reimbursed at the rate of 59 cents per kilometer for the first 5000 km driven and 53 cents for each additional km driven for business purposes after that. This vehicle allowance is tax deductible for the business and reimbursed to you as an employee for the business tax free. To support a deduction, you are required to reasonably support and demonstrate the amount of miles you drove for business purposes. Although CRA does not mandate a specific way of keeping mileage records, it suggests maintaining a logbook showing destination, purpose of trip and the distance to and from the destination. So, as an owner manager of your business, make sure to take advantage of this tax deduction before the end of the year. Declare Bonus for yourself & family members –If this has been a profitable year for your business and you do not want to pay higher corporate taxes, then declaring a year end bonus for yourself and family members working in your business is a great idea. Bonuses declared before the end of your corporation’s fiscal year can immediately be deducted as long as they are paid no later than the 180th day or 6 months after company’s year-end. Bonuses, like salaries, are subject to deductions at source. This means that withholdings for income tax, Canada Pension Plan and Employment Insurance (where applicable) need to be made and these source deductions remitted to the CRA shortly thereafter after declaration. Conduct Holiday Parties –100% of Meals & Entertainment Deductible – When meals & entertainment expenses are incurred to provide a Holiday party / Christmas party or any event to which employees and clients are invited, the cost of such expenses is 100% deductible against business income.At Bajwa CPA Professional Corporation, we can offer you professional and experienced tax planning advice. Please visit our website www.bajwacpa.com for the wide range of accounting & taxation services that we offer. Contact us today for free professional consultation.
Disclaimer
The information provided in this blog post is intended to provide general information. You should consult with a tax professional to full determine the scope of your situation, Vaishali Bajwa and Bajwa CPA Professional Corporation shall not be held liable from usage of the information provided on this page.
ABOUT THE AUTHOR
Vaishali Bajwa
CPA, CGA
Vaishali Bajwa CPA, CGA is the founder of Bajwa CPA Professional Corporation who has years of extensive professional experience in public practice working with highly satisfied business and individual clients to ensure their taxes are minimized and accounting needs are fulfilled. Bajwa CPA mission is to provide valuable tax planning, accounting, and income tax preparation services in the Greater Toronto Area.
The post 6 YEAR END TAX TIPS FOR BUSINESSES appeared first on Bajwa CPA Professional Corporation.