Here are 8 great tax saving tips:
Tax Savings Tip #1: Keep complete records
Be diligent about your record keeping to avoid lost receipts that can mean missing out on tax deductions. Keeping electronic copies of scanned receipts can help you stay organized on the go. KWB recommends using the Receipt Bank (now Dext) app that integrates with Quickbooks Online (QBO) as well as other cloud software programs. Read more about Receipt Bank (Dext) by clicking here.
Tax Savings Tip #2: File your taxes on time
Avoid late penalties (5% late penalty and 1% interest every month thereafter) by filing your taxes on time. Deadlines were deferred in 2020 due to COVID-19, for more information click here.
Tax Savings Tip #3: Hire a family member
As far as tax planning goes, the benefits of hiring your spouse or child and paying them a salary are two-fold: for 2020 the first $13,229 of a family member’s employment income is tax free (i.e. the “basic personal amount”), and their salaries count as a tax deduction for your business. Ensure that salaries are reasonable and keep a paper trail to prove the work was performed.
Tax Savings Tip #4: Separate personal expenses
Make it a habit to pay for any business-related expenses with a separate business credit or debit card. You will simplify your record keeping and potentially avoid a red flag with the CRA. If an expense falls into a grey area, like groceries for your home office, be sure to note how it relates to your business on the receipt.
Tax Savings Tip #5: Claim an automobile allowance
In 2020, you are allowed to claim $0.59 per km for the first 5,000 km you drive for business in your fiscal year and $0.53 per km after that. Make sure you keep a log to track your mileage. An app like Triplog, which integrates with QuickBooks Online (QBO), makes this fairly easy to do. Read more about the Triplog app here.
Tax Savings Tip #6: Write off losses
If you have ever had a non-paying customer, experienced a capital loss or your business was targeted for theft, you can include those losses as legitimate tax deductions.
Tax Savings Tip #7: Deduct home office expenses
Things like utilities, internet charges and stamps are often missed by business owners who run a home-based business or use a home office. The CRA requires you to calculate the percentage of your home space allocated for business use to determine the portion you can claim for rent, mortgage interest, utilities and other expenses. For more information on home office expenses and other deductible expenses, click here.
Tax Savings Tip #8: Claim moving costs
If you moved at least 40km for business reasons, you can claim a number of related costs including transportation and storage fees, realtor commissions, and charges for connecting or disconnecting utilities.
A final tip: an accountant can potentially save you money by identifying tax deductions you may not know about. Book a consultation with a KWB professional by clicking here or call us at 780-466-6204.