Tax planning for small business owners
While running a small business, we cannot refuse to accept that every single penny counts for it to grow. When entrepreneurs are surviving on razor-thin margins and brawling for market share, it can be extremely important to know where you can save your money. At such times, appropriate tax planning becomes a crucial part of the business in order to reduce the taxes for your business. However, to maximize your savings, being aware of the rules and having an organized functioning system can never go in vain.
Here are a few tax planning tips intending to increase awareness on how to improve tax situations for small business owners.
Being a small business owner, you are free to withdraw cash from your business corporation as either a dividend or a salary. If you pay yourself a salary, business can claim a deduction of the same, you will get RRSP room and other deductions. On the other side, dividends are taxed at a lower rate than salary. CRA has tried to curb this and made amendments but still, the system is not flawless, NCS’s tax experts will do the tax planning for you to optimize your tax outcome depending on your tax situations.
Any salary paid out if matches the services provided is considered as a business deduction. Consider employing your family members but the salary must reasonably match the services provided. However, family members are to be treated as “arms-length” employees though NCS makes sure to re-assess your family business’s organizational structure and give you the ideas/outputs best suited for you and your business.
Recognize & document your eligible expenses:
Being aware of legitimate business expenses can do wonders for a small business owner’s tax planning. Money spent solely on the work can be claimed as tax deduction under reasonable circumstances such as using a personal car for business purpose can be easily compensated under business expense. However, documenting money through receipts or reminders should begin as soon as you start making income through your business.
Maintaining a Health Spending Account (HSA):
An HSA has no premium and sleeves all of your eligible health-related expenses on events such as a planned dental appointment or even an unplanned property burn down. All of these are eligible to make an HSA effective and thinking of medical expenses as business deductibles can become a massive turn in a tax plan. HSA compensates for every single medical expense that is made and works pretty well for small business owners.
Apprenticeship Job Creation Tax Credit:
A business that hires tradespeople can benefit themselves by applying for the apprenticeship job creation tax credit that has a value of up to $2000 for recruits within the first two years of the program. Though the list of options when it comes to tax planning for small business owners is better explored than read as if differs according to an individual’s tax situations. With thousands of options out there, NCS make sure to explore the ones in the best interest for you and your business.