Most business owners don’t have time to look into micro details of what tax deductions they may claim and what they cannot. This comes at the back of their little know-how about developing rules and regulations. It’s important to make an on-time tax payment and help from chartered professional accountants of Ontario comes in handy.
Additionally, familiarizing yourself with the procedures for tax filing helps you to avoid some common mistakes, errors, or omissions, and late payment penalties. There are 5 common mistakes that businesses often make during their tax period. Their identification is necessary so you can avoid them in the future.
Common Mistakes: Under-reporting the Income
This is the first mistake business owners make by over or under-reporting the income. It can have a negative impact on tax attorneys and tax departments. This happens while balancing the invoices and payments.
For example, you may forget to enter a payment from a client for that tax period. But, it can cause overlapping of tax figures. You should keep a record of tax documents and every transaction you may conduct.
To avoid such omission, error, or neglect you can hire Chartered Professional Accountants of Ontario. Keep your accounts updated to avoid further mistakes during the taxation period.
Mixing different Accounts
Business owners should work conclusively to identify the difference between types of taxes. A mix of personal and business taxes can lead to more losses for you. You may be eligible for certain rebates, tax claims which you don’t know to identify.
Let’s say, you may not know fuel cost for delivering a business package is deductible. But you haven’t? Likewise, you cannot deduct money used for promoting your business activities, but you may have deducted those?
Therefore, in order to avoid such mistakes, you may consider engaging chartered professional accountants of Ontario. They will give insight about what you may or may not deduct to keep things simple.
Tax Dealing Once a year
Tax dealing once a year may suit you but it can lead to late tax filing and penalties.
Penalties can be in tandem, the first penalty is for not filing tax returns in time. The second penalty will be for the late submission of documents.
You can cover this segment by recording the transactions, as and when happened. This will keep your accounts up to date and ready for filing even if you are away during the tax period.
There are options to pay your taxes quarterly, which you can check with relevant tax officers. This can reduce financial stress during the year.
Must-Know – Tax Credit Claims
This is of utmost importance to know that there are many tax credits you can claim, in Canada. However, you should know whether you qualify for them?
To strengthen your credit claims, you should not forget the value of the smallest item and ensure it is recorded in the account books. This could help you avoid paying extra amounts in taxes.
For example, you can apply a deduction for:
- Petty cash
- Business-related material subscription
- Cost of food for a charity dinner
- Printing cost of business marketing brochures etc.
- Postage stamps
These amounts may reach thousands of dollars. Think how much you will lose by not deducting these costs? Make sure all such expenses make way to your account books.
Your accountant should know what expenses your firm can deduct before paying the tax amount.
Likewise, you may not deduct all start-up costs in one go, rather spread and pay it over fifteen years from starting your business.
You may have spent a vast amount on tools, machinery, equipment, warehouse, etc. All this falls under deductible heads. This could be difficult, so consult your tax accountant to have clarity on your rights to deductibles.
Mistakes with Employee’s Status
Hiring few people can make you enter into a network of tax complications. You should check for Federal and State law statutes for your employees and payrolls. Understand these laws before implementing them in your office for your employees.
Nonetheless, it gets you relief by reversing a wrong entry today and you can correct it next week. But, such mistakes or deductions in payroll with the tax department can have serious implications. So be careful and put exact figures for whatever you paid your employees.
Furthermore, classify your employees in the right category. Otherwise, it can make your employees lose some benefits.
As you can see that during the taxation period, even a minor mistake could become fatal for your business. A taxation mistake could cause late processing of documents, which can cause a late refund or filing penalties. All these are not good for your future business. This can further compound matters if you are not classifying your employees correctly.
You can strategize your tax filing by engaging local Chartered Professional Accountants of Ontario. They will give you the best suggestions and ways to keep your accounts simple ad-free of mistakes.
This will save you time and money.