As the year winds to a close, it presents you with the perfect time to plan for year-end taxes and make necessary adjustments for the new year. Don’t get blindsided by the holidays and neglect to put time and effort into year-end planning. The last thing you want is to be scrambling to get your books in order!
Prepare a Tax Projection
The first task that should be done to prepare for business tax filings is to make a tax projection. A tax projection takes your year-to-date income or loss and projects it through the end of the year. This will give you a rough estimate of the taxes refunded or due. To generate an accurate tax projection, the bookkeeping will need to be current, usually through September. Closing out the third quarter will allow for a better forecast of the last three months of the year.
Implement Tax Strategies
Once you have your preliminary net income projected, you should look at tax saving strategies to reduce your taxable income. Many small business owners look to take advantage of certain tax planning items, such as collecting receipts quicker, deferring payments or revenues. This can help you reduce the taxable income for the upcoming year. Additionally, many small businesses consider incorporation to weigh the advantages and disadvantages of the switch. Other planning items include deciding on the appropriate contribution levels to an RRSP if you run your business as a sole proprietor. All these items should be considered well before year-end to ensure accurate and timely action is taken. Rushing these tax planning items could result in mistakes, leaving you with costly fines and penalties.
Make Required Instalment Payments
Once your tax projection is prepared, you should assess your profit or loss your business will have for the year. If you have a large amount of profit, you may be required to make an instalment payment. The Income Tax Act requires corporations to make instalment payments just like individuals have to make instalment payments according to the Canada Revenue Agency. Your business type will determine the requirements for making these instalment payments.
Plan For business Growth
The months leading up to the end of the year are the perfect time to analyze business growth. The business world is unpredictable and effective leadership and planning can help your business prosper in times of uncertainty. If your financials notice trends reveal growth or decline you should use that data to plan for the new year well before January 1. This exercise is called financial planning or commonly known as budgeting. You may want to consider contacting suppliers to make favorable agreements or look into hiring an additional employee if your business is projected to grow. On the other hand, if business is declining, analyze your current expenses and make necessary adjustments.
Tax Season Deadlines
There’s no time like the present to get started as deadlines are soon approaching. Here’s a list of the major tax season deadlines you’ll need to know:
- Payroll or Dividend Filings are due February 28th, 2022. Source deductions for employees should be paid monthly and any amounts owing should be paid by January 31st, 2022.
- HST Filings are due 1 or 3 months after year-end. If your HST year-end is December 31st and your business is a monthly filer then your deadline is January 31st or March 31st if your business is setup for annual filing.
- Corporate Tax Filings are due 3 or 6 months after year-end. If your corporate year-end is December 31st and your business is profitable then your deadline is March 31st or June 30th if your business is at a loss.
- Personal Tax Filings are due April 30th, 2022 or June 15th, 2022. If you are self-employed your personal taxes owing are due April 30th, 2022 despite your due date to file of June 15th, 2022.
Please note that amounts owing are also due on the same date as the filing deadline with the exception of Personal Tax amounts owning which are due on April 30th, 2022.
Contact MG & Co.
Perhaps one of the most important steps you should take to plan for year-end business tax filings is to contact an accountant. Preparing all the financial information is great, but if you don’t have an accountant lined up to submit the information and prepare the returns, you might be hit with late filing penalties from the CRA. MG & Co. is your trusted advisor for all things business. From customized tax planning situations to corporate tax filings, they will help you ensure all your bases are covered. MG & Co. isn’t just there for you during tax season, instead they work with you every step of the way, watching your business grow right alongside you.
We’ve created two checklists to help you out. Please feel free to download both checklists to get a sense of what you’ll need to prepare for tax season.