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Last updated: Feb. 13, 2019
We may only be a few weeks into the new year, but as soon as the clock strikes midnight on January 1, it means tax season is just around the corner. It might not be at the top of your list for fun things to do, but it’s never too early to start thinking about your 2019 taxes.
Getting a head start will help you determine if there are any changes to the Canada Revenue Agency’s (CRA) small business tax code.
It helps ensure you’re taking advantage of all the small business tax deductions at your disposal.
Getting a head start on your taxes also guarantees you won’t hand your taxes in late and get hit with penalties and fines.
Below are some tax tips that can help you navigate Canada’s often confusing small business tax season.
When Is the 2019 Tax Filing Deadline in Canada?
Preparing your taxes early means not missing any important tax deadlines. When it comes to deadlines and the CRA, there are always unwanted consequences.
If you’re a small business owner, farm operator, independent contractor, or entrepreneur, you have until June 17, 2019 to file your taxes.
Normally, the cut-off is June 15, but it falls on a Saturday this year. If you need it, you get a couple extra days to prepare, fill-out, and send in your taxes.
If you owe taxes, you still need to pay by April 30. If you think you’re going to owe money to the CRA, you should have your taxes prepared before the April 30th deadline.
If you file late and owe, you’ll get hit with both a penalty for filing late and daily interest charges on any outstanding balance not paid by April 30.
What is the earliest you can file your taxes in 2019? In 2018, the CRA started to accept tax returns on February 25, so chances are good that the first day to file your taxes will be around the same time in 2019.
There are benefits to filing early. If it turns out that you’re owed a tax refund, you’ll receive your funds sooner.
How to File Taxes in Canada
There are two ways you can file your taxes in Canada: by regular (paper) mail or electronically, through the Internet.
When it comes to sheer convenience, more and more small business owners are having their tax professionals send their tax returns in electronically.
According to the Government of Canada, 68.8% of Canadians filed their taxes electronically in 2018. Of those, the majority, 57.3%, had their taxes sent in by EFILE.
EFILE is used by those who have their annual tax returns prepared by tax professionals. With EFILE, the tax experts send the completed tax return to the CRA electronically, on your behalf.
Just 13.2% of all Canadians filed their taxes by mail.
Small Business Tax Changes in 2019
Canada’s Income Tax Act is confusing at the best of times. It gets even more difficult knowing the CRA makes regular changes to tax laws that affect small businesses. And 2019 is no different.
The small business tax rate is going from 10% to 9% in 2019. With this reduction, the combined federal and provincial average income tax rate for small business in Canada will be 12.2%.
But there are also changes to how much “passive income” a small business can have.
Before 2019, small businesses paid a relatively low tax rate of 10% on the first $500,000 of business earnings.
Starting January 1, 2019, if those same businesses hold in excess of the new limit on passive income (real estate, stocks, bonds), some of those earnings will be hit with higher corporate tax rates. It all depends on how far over the new limit you are.
Deductions to Remember for Small Business Taxes
Speaking of deduction, there are a large number of deductions that small business owners can claim to help reduce the amount they have to pay out in taxes. Here is just a partial list of some of the expenses your small business can deduct.
- Home office expenses
- Business start-up costs
- Advertising and promotions
- Insurance
- Mortgage interest
- Repair and maintenance
- Property taxes
- Capital Cost Allowance
- Business travel costs
- Meals and entertainment (up to 50%)
- Vehicle expenses and fuel costs
- Gifts for holidays or special occasions
- Accounting and legal fees
Make sure you keep track of all your receipts. You don’t need to send in receipts when you file your taxes electronically, but if the CRA asks for clarification and you can’t provide the receipts, you won’t be able to make that deduction.
Getting the Most from your Tax Return
Getting a head start on the 2019 tax season in Canada is the best way to make sure your small business taxes are prepared accurately, that you take advantage of every deduction you can legally claim, and get your taxes filed early.
Unfortunately, retail, off-the-shelf electronic tax programs will not necessarily be able to catch anything you might have overlooked. If your tax professional has experience working with small business owners, they’ll be able to make sure you claimed every possible deduction.
FBC – Helping Self-Employed Canadians Manage Their Taxes
FBC is where Canadian small-business owners turn when they want their taxes done accurately, efficiently, and on time.
Since 1952, FBC has worked exclusively with small business owners, farm operators, independent contractors, and entrepreneurs. Over those years, FBC has provided clients from across Canada personalized tax services that help maximize their tax deductions and minimize their tax burden.
At FBC, we know that every business is unique, and everyone has their own accounting and tax planning needs. That’s why FBC is the only firm in Canada to offer integrated tax services on a year-round Membership basis.
For more information on FBC and the services we offer, call us today at 1-800-265-1002 or submit an online form and an FBC tax specialist will contact you at your earliest convenience.