Five simple tax tips to help save time and money and lessen the stress
TORONTO, March 10, 2015 /CNW/ - Tax time can be stressful for most, especially for time-crunched small business owners. However, successful entrepreneurs know that being prepared and informed can help alleviate some of the pressures of tax season.
"Understanding what tax credits and savings opportunities are available to business owners and knowing what they can claim is half the battle," said Sarah Adams, vice-president, Small Business, RBC. "With a little planning, business owners can benefit from some tax savings strategies while also eliminating the last minute scramble. Ultimately, saving them time and money as well as providing them with some peace of mind."
RBC provides the following tax-planning and saving tips for small business owners:
- File income tax return on time and online: It's important to comply with filing deadlines to avoid paying a late-filing penalty. This penalty is a minimum of five per cent of the balance owing on your return, plus another penalty of one per cent of the unpaid tax, multiplied by the number of months the return is not filed (to a maximum of 12 months). Consider online tax filing, available 24 hours a day/7 days a week, to save time and hassle in paying federal and provincial taxes and payroll source deductions.
- Maximize non-capital losses: If the business has a non-capital loss (meaning, expenses exceed income for the business) in any year, consider when would be the best time to use this loss. Non-capital losses can be used to offset other business income in any given tax year, can be carried back three years, or carried forward for up to seven years. Rather than use it in the tax year that the capital loss occurred, it may make more sense to carry the non-capital loss back up to three years to recover income tax already paid, or to carry it forward to offset a larger tax bill in the future.
- Take advantage of tax credits and deductions: One of the easiest ways to boost tax savings is to take advantage of all eligible tax credits. For example, look at any lunch or dinner expenses, coffee meetings, gas, license and registration fees (if a personal car is used for business) - incorporate these expenses when ready to file.
- Income splitting: The income splitting tax strategy is an opportunity to take full advantage of the marginal tax rate disparities. The higher one's income, the higher their marginal tax rate. By transferring a portion of that income to a person with a lower income such as a spouse or child, reduces the marginal tax rate on the higher income.
- Build expense tracking into the daily routine: Avoid scrambling at the last minute to find receipts, consider tracking business finances online. This strategy will help track expenses all year-round, and if used with online tax software at tax time, all the business' financial information can be easily moved into the relevant tax forms. Using a dedicated credit card for the business makes it easy to separate and track expenses for ease of filing. Using a dedicated business credit card makes it easy to separate and conveniently track expenses for ease of filing.
"A qualified accountant or your banking advisor can review your available tax savings opportunities and help you implement strategies specific to your situation," added Adams.
About RBC Small Business Banking
Small businesses in Canada want flexible banking choices, convenient payment options and simple ways to manage their cash flow. Whether they are starting a business, managing growth, or succession planning, the RBC Advice Centre or Starting a Business website can help answer their questions. Free interactive tools and calculators provide customized information covering many facets of business finance and online advice videos are updated regularly to answer questions that are top of mind with small business owners. RBC Group Advantage is a comprehensive program providing employees with advice from qualified investment specialists and financial advisors and also offers flexible plans -- including group RRSPs, group savings and group bank -- as well as a mortgage relocation program, to help small business owners attract, retain and motivate productive, long-term employees. With the guidance of RBC business advisors, small business owners have access to free, no obligation professional advice about RBC products and services. For more assistance, please visit www.rbcadvicecentre.com.
SOURCE RBC
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Kate Yurincich, RBC Communications, 416-974-1031
Sophie Garber, RBC Communications, 416-974-2138
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