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| Financial |
 Tax
Concerned Organization - A New Years ResolutionBy Debbie Patterson, owner of Odessey Business Services The New Year is a busy time for all of us, especially small business owners. We are looking at wrapping up the previous year's operations, books and lastly, preparations for income tax. The quickest and most organized way to wrap up year-end is to make a list of what needs to be done. Go through your receipts for the year and organize them in envelopes, file folders or bags by category, if you haven't already. Make new files for next years receipts or buy an accordion file that has pre-labelled files. Make extra notes of any large purchases of equipment, furniture, computers and tools, as these are treated differently on the tax return than regular expenses. Gather all information that will be needed to calculate business use of home and vehicle expenses. These quick preparations will help you or your tax preparer complete your taxes without missing important information. Organizing the receipts by proper category is important. One thing I have noticed over the years of going through peoples receipts is that many people over-organize them. Office expenses include office and computer supplies and postage. Promotion and entertainment includes drinks, meals, gifts, event tickets and travel expenses that are incurred over 40 kms from your home base. Materials, cost of goods sold and supplies are also main categories, as well as wages, casual labour and advertising. All companies have their own specific operations so even if a receipt doesn't fit in any category, as long as it can be justified, then it can be used. Any purchase over $200 for furniture, tools, equipment or vehicles are not used as 100% expense, but depreciated. Separate these receipts for your tax preparer so that they may be properly allocated on the tax return. Business use of home expenses are a valuable deduction against the years income, but are often overlooked. If you used part of your home as an office to make appointments or to store materials, then you can use a portion of the home expenses on your return. The portion allowed is based on the percentage of the home used for business. The best determination is to calculate the square footage used for business versus the entire home. If owned, a portion of mortgage interest and property taxes, not the actual mortgage payment, is deductible. Insurance, utilities and any repairs done to accommodate the business can also be used. If you rent, a percentage of the rent can be used. Having the paperwork verified by the bank or statements copied early in the new year will save you time and money when you are ready to have your taxes prepared. Another valuable write-off is the business use of personal vehicle expenses. The percentage allowed is based on kilometers driven for business versus total kilometers driven in the year. A mileage log is the best way to keep records of the business use and after taking a mileage reading January 1st, daily usage recorded in the log are acceptable records for Revenue Canada. Oil and gas, repairs and maintenance, insurance and registration, as well as interest payments made on a loan, or lease payments, can all be used against income earned on your taxes. A few other things to keep in mind when organizing for taxes is the gathering of all T-4's, especially those from easily forgotten part time work, and any EI or WCB payments from the year. Daycare, donation and medical expenses must include the original receipt and are often left out due to the lack of time to get these receipts together. Tuition and medical receipts can be obtained from the institution or pharmacy if the originals can't be found. Receipts for RRSP donations and those cashed in during the year will come directly from your financial institution or can be obtained from them if the original is not available. These are some of the situations that are easily missed and a tax return filed without all of the proper information will be amended by Revenue Canada and could result in an unexpected tax bill. The few minutes spent organizing last years paperwork early in the New Year will take some of the stress off of you and your tax preparer later in the tax season. This will let you run your business this year with fewer worries where Revenue Canada is concerned, and that we all can appreciate. Debbie Patterson is the owner operator of Odessey Business Services, specializing in income tax. Visit her at www.odesseybusiness.com for more tax tips or contact her directly at 403.816.5098 |